Korean financial regulators face increasing pressure to approve cryptocurrency exchange-traded funds (ETFs) following the recent approval of spot Ethereum ETFs by the United States Securities and Exchange Commission (SEC).
SEC’s Impact on Korean Regulators
The SEC’s approval of Ethereum ETFs on May 24, 2024, has intensified the scrutiny on South Korea’s Financial Services Commission (FSC) and Financial Supervisory Service (FSS). Local media reports suggest that this decision may compel Seoul’s financial regulators to reconsider their conservative stance on digital assets.
Current Regulatory Stance
Unlike the U.S., Korean regulators have been cautious about allowing crypto asset trading on traditional securities markets. The FSC mandates that ETFs must comply with the Capital Markets Act, which limits them to traditional underlying assets such as established financial instruments, securities, international currencies, and commodities.
The FSC oversees the regulation of financial institutions and markets in South Korea. In early February, the South Korean government updated the Virtual Asset Users Protection Act, reflecting ongoing regulatory efforts.
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Calls for Change
Critics argue that South Korea’s restrictive stance on digital assets is outdated. Xangle, a leading digital currency data provider in Seoul, has called for regulatory revisions to align with the evolving digital asset landscape.
Jung Eui-jung, head of the Korean Stockholders’ Alliance, emphasized the need for Seoul to follow the U.S. example and approve Bitcoin and Ethereum ETFs. He warned that continued hesitation could lead to investors shifting their funds to U.S. markets, particularly as the U.S. progresses in opening doors for other cryptocurrencies.
Future Implications
As the U.S. continues to advance in the integration of digital assets with traditional finance, the pressure on Korean regulators is expected to mount. The SEC’s decision may serve as a catalyst for South Korea to rethink its approach to crypto ETFs and potentially foster a more accommodating regulatory environment for digital assets.
