A major South Korean economic think tank has reportedly quashed the prospects of a Bitcoin or Ethereum spot ETF approval by Seoul due to risks and regulatory issues.
The comments are attributed to a Korea Institute of Finance researcher, Lee Bo-mi as quoted by News1 paper.
According to Lee, “The adoption of crypto asset-linked products carries significant risks to financial stability.
South Korean Economic Think Tank Fears Bitcoin ETF Launch
Lee said that adoption of crypto-linked financial products could trigger a rise in the prices of cryptocurrencies.
On the other hand, the author pointed out that when prices decline, the depth and soundness of financial markets and firms could be affected.
Lee highlighted that more analysis is needed to understand the ‘advantages and disadvantages’ of allowing products linked to crypto assets.
While there have been promises from politicians to solve the problem, the regulators appear to be leaning towards a more conservative solution.
Financial and crypto proponents are now calling for Seoul to follow the path of Washington and Hong Kong to approve crypto spot ETFs.
South Korean Researcher: Cryptocurrency Still ‘Too Volatile’ for Financial Sector Integration
According to Lee, there are drawbacks associated with the approval of crypto spot ETFs and he elaborated on that.
“There is a general lack of understanding about the value of crypto assets. Tokens are highly volatile. Incorporating products that use these as underlying assets into the [South Korean] institutional system creates the perception among market participants that virtual assets have a proven (track record).”
According to Lee, for the purpose of mitigating risks connected with virtual asset-based ETFs, regulators will have to make sure they are equipped well enough before approving such products.
According to Lee, even if some regulators wanted to design the right environment for BTC or ETH spot ETF, “there are constraints on the extent of the investor protection measures that can be put in place.”
South Korea only allows recognized brokers to trade Bitcoin futures ETFs, but the current laws do not allow spot ETFs.
