South Korean Think Tank Warns Against Bitcoin ETFs, Citing Potential Risks
A prominent South Korean economic think tank has expressed reservations about the approval of Bitcoin (BTC) or Ethereum (ETH) spot exchange-traded funds (ETFs) in Seoul. The Korea Institute of Finance researcher, Lee Bo-mi, published a paper stating that introducing cryptoasset-linked products could have a negative impact on the country’s financial stability.
Lee argued that approving such financial products could lead to a surge in crypto prices, prompting a significant amount of capital to flow into the virtual asset market. This, in turn, could result in increased inefficiency in resource allocation. Additionally, if crypto prices were to decline, Lee warned that the liquidity of financial markets and the stability of financial companies could be compromised.
Lee emphasized the need for further research to fully understand the benefits and drawbacks of allowing cryptoasset-linked products. While politicians have promised to address this issue, regulators seem to be taking a more cautious approach.
Despite this, financial and crypto advocates are urging Seoul to follow the lead of Washington and Hong Kong in approving crypto spot ETFs. However, Lee argued that the drawbacks of such approval would outweigh the benefits, citing the potential intensification of associated risks. Lee stressed the importance of regulators being adequately prepared before granting approval for BTC or ETH spot ETFs.
Lee also noted that even if regulators aimed to create favorable conditions for approval, there are limitations to the effectiveness of investor protection measures they can implement. Currently, South Korea permits recognized brokers to handle Bitcoin futures ETFs, but the issuance or brokerage of spot ETFs is still prohibited by law.
