South Korea Faces Pressure to Approve Crypto ETFs After SEC Ethereum Decision
South Korea is now at the forefront of a regulatory crossroads following the U.S. SEC’s unexpected approval of Ethereum exchange-traded funds (ETFs). This development has intensified global competition among financial markets, especially regarding their stance on digital asset regulation. Momentum for cryptocurrency ETFs gained traction after Hong Kong’s approval, and recent reports indicate that South Korean regulators are experiencing mounting pressure to follow suit in light of the SEC’s landmark decision.
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Critics argue that South Korea’s regulatory framework is outdated and fails to acknowledge the increasing significance of digital assets in modern finance.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.
Outdated Regulations Could Undermine Korea’s Financial Position
“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.
More on that soon!
