FameEX Hot Topics | US ETH ETF Approval Increases Pressure on Korean Regulators

Korean regulators, unlike their U.S. counterparts, have been notably cautious about permitting crypto trading on traditional securities markets. The Financial Services Commission (FSC) and Financial Supervisory Service (FSS) of Korea are now facing increasing pressure to approve cryptocurrency exchange-traded funds (ETFs), following the United States Securities and Exchange Commission’s (SEC) recent approval of spot Ethereum ETFs. Local media reports suggest that the SEC’s decision on Ethereum is likely to influence Seoul’s financial regulators to reconsider their conservative stance on digital assets.

The SEC approved the creation of ETFs for Ethereum, the second-largest cryptocurrency in the world, on May 24, 2024. This followed an earlier approval of Bitcoin ETFs in January 2024. ETFs, which allow investors to gain exposure to a basket of securities, represent a significant advancement in bridging traditional finance with the digital asset industry.

In stark contrast, the FSC and FSS in Korea have maintained a cautious approach to introducing crypto asset trading on traditional securities markets. The FSC has stipulated that ETFs must strictly comply with the Capital Markets Act, which mandates that they only be linked to traditional underlying assets such as established financial instruments, securities, international currencies, and commodities. This framework provides the foundation for financial derivatives. The FSC is a governmental agency responsible for overseeing and regulating financial institutions and markets in South Korea. In early February, the South Korean government updated the Virtual Asset Users Protection Act, reflecting ongoing regulatory caution.

According to a report by the Korea Times, Xangle, a prominent digital currency data provider based in Seoul, has criticized the ban on digital assets in the traditional securities market. Xangle has described the current regulations as ‘outdated’ and in need of revision to align with the growing importance of digital assets in modern finance. “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,” said a spokesperson from Xangle.

Jung Eui-jung, head of the Korean Stockholders’ Alliance, has also emphasized the importance of Seoul following the U.S.’s example by approving Bitcoin and Ethereum ETFs. He noted that the existing hesitation is causing frustration beyond the crypto sector. Jung warned that if Seoul regulators continue to lag behind while the U.S. advances, investors might start shifting their funds to U.S. markets. He predicted that it is only a “matter of time for the U.S. to fully open the door for other less-traded cryptocurrencies.”

The growing pressure on Korean regulators comes not only from financial institutions and digital asset companies but also from retail investors seeking broader investment opportunities. The SEC’s approval of Ethereum ETFs signifies an increasing acceptance of digital assets within traditional finance, a trend that South Korean regulators will find increasingly challenging to ignore as the global financial landscape continues to evolve.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.