Korean Regulators Under Pressure As U.S. and Hong Kong Embrace ETH ETFs

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SEC’s sudden U-turn towards ETH ETFs paved the way for other assets to compete in the market concerning the regulatory stance. The markets started buzzing when Hong Kong opened the doors for ETFs to stay alive in the financial gambit. South Korea, one of the hot crypto spots, also deals with the dilemma of not approving ETFs.

According to local news, Korean regulators face increasing pressure to approve cryptocurrency ETFs after the U.S. SEC approves the spot for Ethereum ETFs. The SEC’s decision will influence Seoul’s financial regulators to reconsider their stance on digital assets. Meanwhile, the Financial Services Commission (FSC) and Financial Supervisory Service (FSS) are reluctant to allow crypto asset trading on the regular securities market.

Contrasting Approaches

Unlike the U.S., which approved Bitcoin ETFs in January 2024 and Ethereum ETFs in May 2024, Korean regulators have hesitated to include digital assets in traditional financial systems. The FSC insists that ETFs follow the Capital Markets Act, restricting them to conventional assets. They fear this will disrupt their financial system. 

Calls for Revision

Critics argue that Korea’s regulations are outdated and need to be updated to reflect the growing importance of digital assets in modern finance. Xangle, a leading digital currency data provider in Seoul, has spoken out against the ban on digital assets in traditional securities markets and advocates for regulatory reforms to match global trends.

With the SEC’s approval, ETH ETFs are widely accepted, and not only that, but Hong Kong’s acceptance has also increased its adoption globally. This creates global pressure on Korean regulators to reconsider their stance on digital assets. Jung Eui-jung, head of the Korean Stockholders’ Alliance, stresses the need to follow the U.S.’s example in approving Bitcoin and Ethereum ETFs. Failure to do so may lead investors to move their funds to U.S. markets, potentially weakening Korea’s position in the global financial market.

Moreover, if Korea continues to restrict crypto, it will cause local investors to drift to the US market, negatively impacting the country’s financial health. They need a balanced approach to foster innovation and bring capital inflow to the system.