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Korea is under increasing pressure to approve cryptocurrency ETFs following the US approval of Ethereum
Real-time charts for bitcoin and other digital currencies traded in Korea are displayed on a bulletin board at the Bithumb cryptocurrency exchange in Seoul’s Seocho district, in this photo taken on April 18. Yonhap
By Yi Whan-woo
Korean financial regulators are under increasing pressure to approve exchange-traded funds (ETFs) for cryptocurrencies, after the US securities regulator gave the green light to the creation of ETFs for Ethereum on Thursday (local time) .
The decision made by the US Securities and Exchange Commission (SEC) regarding ethereum, the world’s second largest cryptocurrency, comes after the SEC allowed bitcoin, the world’s largest cryptocurrency to trade as an ETF in January .
ETFs are baskets of securities available for trading only on the traditional securities market.
In this regard, the SEC’s measures in favor of bitcoin and ethereum mark a significant shift in lowering the barriers between traditional finance and the digital asset industry.
In stark contrast, the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) are reluctant to open the doors to cryptocurrency trading on the traditional securities market.
A photo illustration of Ethereum, the world’s second largest cryptocurrency / Reuters-Yonhap
Citing the Capital Markets Act, the FSC said ETFs deal only with the underlying assets, i.e. the actual financial assets or security on which a financial derivative is based. These include international currencies and commodities.
“Under the circumstances, the SEC’s Thursday decision on ethereum is expected to prompt financial regulators in Seoul to reconsider its regulations against digital assets,” said Xangle, a provider of digital currency data and information based in Seoul.
He called the ban on digital assets in the traditional securities market “obsolete,” especially considering that the government has pledged to revive Seoul’s undervalued stock market in the name of fighting the so-called “Korea discount.”
A strict regulatory policy is considered to be the reason behind the lower valuation of Korean stocks compared to global ones.
Jung Eui-jung, head of the Korean Shareholders’ Alliance, believes that following the US path and supporting bitcoin and ethereum ETFs is crucial “to ensure that investors, both in traditional finance and digital assets, do not leave Korea” .
“Who would want to invest their money in a market that lags behind the rapidly evolving regulatory landscape?” Jung said.
He warned that investors may instead withdraw their money to invest in US markets if regulators in Seoul “continue to make little progress as the US makes strides and advances” on digital assets.
“It will be a matter of time for the US to fully open the door to other less traded cryptocurrencies and for at least Korea to approve ETFs for bitcoin and ethereum,” Jung added.
Meanwhile, the main opposition Democratic Party of Korea (DPK), in line with its candidates in April’s general election, is expected to face the need to lower barriers on digital assets when the next National Assembly begins.
Separately, FSS Governor Lee Bok-hyun felt that the atmosphere for a public discussion on whether to allow cryptocurrencies into mainstream finance could be created in the second half of the year.