According to local news outlet The Korea Times, South Korean financial regulators are under increasing pressure to approve exchange-traded funds (ETFs) for crypto assets following the U.S. Securities and Exchange Commission’s (SEC) decision to approve Ethereum ETFs.
The country’s Financial Services Commission (FSC) have been reluctant to allow the trading of crypto assets on traditional securities markets. The FSC cited the Capital Markets Act, which states that ETFs should only deal with underlying assets like international currencies and commodities, and warned that violations could result in punishments.
However, experts believe the U.S. SEC’s approval might push the Korean regulator to reconsider its stance on digital assets.
RELATED: U.S. SEC Officially Approves Ethereum ETFs, Public Trading Yet to Start
Jung Eui-jung, the leader of the Korean Stockholders’ Alliance, reportedly emphasised that South Korea should follow the U.S.’s example by approving ETFs for Bitcoin and Ethereum. He warned that failing to adapt could lead investors to withdraw their money from the Korean market in favour of more progressive U.S. markets.
“Investors, both in traditional finance and digital assets, will exit Korea if the market continues to lag behind the fast-changing regulatory landscape,”
Jung reportedly stated.
“It will be a matter of time before the U.S. fully opens the door to other less-traded cryptocurrencies, and Korea should at least approve ETFs for Bitcoin and Ethereum.”
The Korean Times also reported that Xangle, a Seoul-based data provider on digital currencies, described the current ban on digital assets in traditional securities markets as outdated. They argued that rigid regulations contribute to the lower valuation of Korean stocks compared to global peers and that easing crypto regulations could help boost the undervalued Seoul stock market.
Earlier this year, the FSC’s Governor, Lee Bok-hyun, revealed that the regulator had discussions with the U.S. SEC to seek counsel on spot Bitcoin exchange-traded funds. At the time, the Governor noted that a meeting with the U.S. regulators for further discussions is scheduled for the second half of the year.
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Meanwhile, a new regulation regime for cryptocurrencies, the Virtual Asset User Protection Act (VAUPA), is scheduled to take effect on July 18, 2024, in South Korea. This law, designed to protect citizens’ digital assets and prevent unfair trading practices, includes severe penalties for illegal activities in the crypto market. Notably, the FSC has introduced guidelines for enforcing these new regulations.
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