South Korea Faces Calls to Embrace Crypto ETFs Following Actions in US and Hong Kong

The SEC’s abrupt endorsement of Ethereum ETFs has ignited competition among global financial markets, particularly concerning regulatory positions on digital assets. Enthusiasm surged following Hong Kong’s embrace of ETFs, with local reports suggesting Korean regulators are under pressure to approve cryptocurrency ETFs following the SEC’s nod to spot Ethereum ETFs.

This move by the SEC could prompt Seoul’s financial authorities to reconsider their cautious stance on digital assets. However, the Financial Services Commission (FSC) and Financial Supervisory Service (FSS) remain cautious about integrating crypto asset trading into the mainstream securities market.

In contrast to the United States, which greenlit Bitcoin ETFs in January 2024 and Ethereum ETFs in May 2024, South Korean regulators have exercised caution in integrating digital assets into their traditional financial frameworks. The FSC maintains that ETFs must adhere to the Capital Markets Act, limiting them to conventional assets, citing concerns about potential disruptions to the financial system.

Critics argue that South Korea’s regulatory framework is outdated and fails to acknowledge the increasing significance of digital assets in modern finance. Xangle, a prominent digital currency data provider based in Seoul, has condemned the prohibition of digital assets in traditional securities markets, advocating for regulatory adjustments to align with global trends.

“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.”

The growing adoption of ETH ETFs worldwide, buoyed by Hong Kong’s backing, has intensified pressure on Korean regulators to reconsider their stance on digital assets. Jung Eui-jung, leader of the Korean Stockholders’ Alliance, underscores the importance of Korea emulating the U.S.’s approval of Bitcoin and Ethereum ETFs. He cautions that a failure to do so could prompt investors to shift their investments to U.S. markets, potentially undermining Korea’s standing in the global financial arena.

Imposing restrictions on cryptocurrencies might divert local investors towards the U.S. market, adversely affecting Korea’s financial well-being. A balanced approach is crucial to fostering innovation and attracting investment inflows.

This too includes Australia, which looks set to launch its first official Spot Bitcoin ETF on the ASX very soon through Monochrome, subject to regulatory approvals.