Korean financial regulators are facing increasing pressure to authorize the creation of crypto Exchange-Traded Funds (ETFs), following the approval of Ethereum ETFs by the US Securities and Exchange Commission (SEC) on 24 May 2024.
The SEC has greenlighted the creation of ETFs for Ethereum, the world’s second-largest cryptocurrency, following its earlier approval of Bitcoin ETFs in January 2024.
ETFs are financial instruments that allow investors to gain exposure to a basket of securities. The approval of crypto ETFs marks a significant step in bridging the gap between traditional finance and the digital asset industry.
In contrast to their counterparts in the US, the Korean Financial Services Commission (FSC) and Financial Supervisory Service (FSS) have been cautious about introducing crypto asset trading on traditional securities markets.
Citing the Capital Markets Act, the FSC said that ETFs should exclusively deal with underlying assets, which traditionally refer to real financial assets or securities upon which financial derivatives are based, including international currencies and commodities.
Seoul’s Financial Regulators To Reconsider Their Stance On Digital Assets
The SEC’s decision regarding Ethereum is expected to exert pressure on Seoul’s financial regulators to reconsider their stance on digital assets.
In a recent interview with the Korea Times, Xangle, a Seoul-based data and information provider on digital currencies, criticized the ban on digital assets in the traditional securities market as “outdated.”
“Under the circumstances, the SEC’s Thursday decision on ethereum is anticipated to press Seoul’s financial regulators to reconsider its regulations against digital assets,” said Xangle. The company added that this prohibition is especially concerning considering the government’s commitment to boosting the undervalued Seoul stock market, aiming to address the so-called “Korea discount.”
The Korean Stockholders’ Alliance, led by Jung Eui-jung, has highlighted the importance of following the US path and embracing ETFs for Bitcoin and Ethereum.
Jung asserted that such a move is critical to prevent investors – both in traditional finance and digital assets – from seeking opportunities outside of Korea.
He also warned that if Seoul’s regulators fail to make significant progress while the US takes significant strides forward in the digital asset space, investors may redirect their funds to the US markets.
Democratic Party of Korea Pledges to Reduce Crypto Barriers
The main opposition Democratic Party of Korea (DPK) has pledged to reduce barriers to digital assets, which is expected to happen when the next National Assembly convenes.
In February, they announced their plan to approve the issuance, listing, and trading of cryptocurrency-backed ETFs.
NEW: South Korea's opposition party is now pledging to let domestic investors buy #Bitcoin ETFs
Both parties now support lifting the ban 🇰🇷 pic.twitter.com/A29QCqtlqj
— Bitcoin Magazine (@BitcoinMagazine) February 20, 2024
The DPK also pledged to increase the deduction limit for capital gains from crypto-asset investments to 50 million won, up from the current 2.5 million won.
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Furthermore, they pledged to ban crypto trading by lawmakers while parliament is in session, following the departure of Representative Kim Nam-kuk, who left the party amidst controversy surrounding his cryptocurrency transactions.
Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
