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

Unlike their U.S. counterparts, Korea’s FSC and FSS have been cautious about allowing crypto trading on traditional securities markets. Korean regulators are under mounting 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). According to local media, the SEC’s decision regarding Ethereum is expected to exert pressure on Seoul’s financial regulators to reconsider their stance on digital assets.

The SEC greenlighted the creation of ETFs for Ethereum, the world’s second-largest cryptocurrency, on May 24, 2024, following its earlier approval of Bitcoin ETFs in January 2024. ETFs are financial instruments that allow investors to gain exposure to a basket of securities. Approving crypto ETFs marks a significant step in bridging the gap between traditional finance and the digital asset industry.

In contrast to their counterparts in the U.S., the Korean Financial Services Commission (FSC) and Financial Supervisory Service (FSS) have been cautious about introducing crypto asset trading on traditional securities markets. According to the FSC, ETFs must strictly adhere to the Capital Markets Act, which stipulates that they must only be linked to traditional underlying assets. These assets include established financial instruments, securities, international currencies, and commodities, which provide the foundation for financial derivatives. The Financial Services Commission is a government agency responsible for overseeing and regulating financial institutions and financial markets in South Korea. The South Korean government issued a new update to the Virtual Asset Users Protection Act in early February.

According to a report by the Korea Times, Xangle, a leading digital currency data provider based in Seoul, has spoken out against the ban on digital assets in the traditional securities market, describing it as ‘outdated' and needing revision to accommodate the growing significance of digital assets in modern finance.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.”

Jung Eui-jung, the head of the Korean Stockholders’ Alliance, also stressed the importance of Seoul following the U.S.’s example and approving Bitcoin and Ethereum ETFs, as the current hesitance is causing frustration that extends beyond the crypto sector. Jung warned that if Seoul regulators continue to make little progress while the U.S. advances, investors might shift their funds to U.S. markets, saying it will be a “matter of time for the U.S. to fully open the door for other less-traded cryptocurrencies.”

The mounting pressure on Korean regulators is not just from financial institutions and digital asset companies but also from retail investors eager for broader investment opportunities. The approval of Ethereum ETFs by the SEC symbolizes a growing acceptance of digital assets within traditional finance, a move that South Korean regulators will find increasingly hard to ignore as global financial landscapes evolve.

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