South Korean Think Tank: Approval of Bitcoin ETFs Would Have Negative Consequences
A prominent South Korean economic think tank has expressed skepticism towards the idea of the Seoul government approving a Bitcoin (BTC) or Ethereum (ETH) spot exchange-traded fund (ETF). The Korea Institute of Finance researcher, Lee Bo-mi, outlined these concerns in a recent paper, arguing that introducing crypto-linked financial products could potentially undermine the country’s financial stability.
Lee specifically warned that approving such products could lead to a surge in crypto prices and cause a significant amount of capital to flow into the virtual asset market. This, in turn, could result in increased inefficiency in resource allocation. Conversely, if crypto prices were to drop, Lee cautioned that the liquidity of financial markets and the stability of financial companies could be compromised.
According to Lee, further research is required to fully understand the potential benefits and drawbacks of allowing cryptoasset-linked products. While politicians have promised to address this issue, regulators seem to be adopting a more cautious approach.
Despite this, financial and crypto advocates have urged the South Korean government to follow in the footsteps of Washington and Hong Kong by approving crypto spot ETFs. However, Lee argued that the risks associated with such approval would outweigh the benefits. The researcher emphasized the need for regulators to be well-prepared and to implement effective investor protection measures before granting approval for BTC or ETH spot ETFs.
Currently, South Korea permits recognized brokers to handle Bitcoin futures ETFs, but the law still prohibits the issuance or brokerage of spot ETFs.
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