The Korea Institute of Finance stated in a recent report that the introduction of a spot cryptocurrency exchange-traded fund (ETF) is likely to cause more problems than benefit the national economy.
The Korea Institute of Finance said, “If the product is allowed, side effects may occur, such as increased inefficiency in resource allocation, increased exposure to risks related to cryptocurrency in the financial market, and weakened financial stability.” report.
A local think tank explained that cryptocurrency ETFs could drive the cryptocurrency market, cutting off massive cash flows from domestic financial markets, which could mean less investment in domestic industries. KIF added that this could make domestic financial markets more vulnerable to crises in the cryptocurrency sector, potentially increasing investor distrust in markets and regulators.
“At this point, we believe that its introduction would cause more harm than good,” the report said. Nonetheless, the think tank acknowledged that cryptocurrency ETFs would be a good store of value if the underlying cryptocurrency grows into a more defined and unique financial asset.
South Korean regulators currently do not allow the issuance or trading of spot cryptocurrency ETFs on the grounds that Bitcoin and other cryptocurrencies cannot be used as the underlying assets for such investment vehicles.
However, Korea’s ruling party, the left-wing Democratic Party, I recently made a plan As part of our campaign pledge from the last general election, we are making physical crypto ETFs available locally.
The United States launched its first spot cryptocurrency ETF in January. Eleven spot Bitcoin funds in the U.S. have since amassed a combined net assets of $55.55 billion, exceeding pre-launch expectations. Hong Kong also introduced Bitcoin and Ethereum spot ETFs in April. ASX has listed its first spot Bitcoin ETF. last week.
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About the author
Danny Park is The Block’s East Asia reporter, writing about topics including Web3 development and cryptocurrency regulation in the region. He previously worked as a reporter for Forkast.News, where he actively covered the fall of Terra-Luna and FTX. Based in Seoul, Danny previously produced written and video content for media companies in Korea, Hong Kong and China. He holds a Bachelor’s degree in Journalism and Business Marketing from the University of Hong Kong.