Korean 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).
Local media reports suggest that the SEC’s decision on Ethereum could influence Seoul’s financial regulators to reconsider their approach to digital assets.
The SEC approved the creation of ETFs for Ethereum, the world’s second-largest cryptocurrency, on May 24, 2024, after previously greenlighting Bitcoin ETFs in January 2024.
ETFs are financial instruments allowing investors to gain exposure to a basket of securities. Approving crypto ETFs is seen as a significant step in integrating traditional finance with the digital asset industry.
In contrast to 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 adhere to the Capital Markets Act, which mandates that they be linked to traditional underlying assets.
These assets include established financial instruments, securities, international currencies, and commodities, providing the foundation for financial derivatives.
READ MORE: SEC Approves Spot Ether ETFs: A Different Path from Bitcoin ETFs
The Financial Services Commission, a government agency, oversees and regulates financial institutions and markets in South Korea.
In early February, the South Korean government updated the Virtual Asset Users Protection Act.
According to the Korea Times, Xangle, a leading digital currency data provider in Seoul, criticized the ban on digital assets in the traditional securities market, calling it “outdated” and in need of revision to reflect the growing importance of digital assets in modern finance.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,” noted Xangle.
Jung Eui-jung, head of the Korean Stockholders’ Alliance, emphasized the need for Seoul to follow the U.S.’s lead in approving Bitcoin and Ethereum ETFs.
He highlighted the frustration caused by the current regulatory hesitance, which extends beyond the crypto sector.
Jung warned that if Seoul regulators continue to lag while the U.S. progresses, investors might move 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.”
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