South Korean Think Tank: Bitcoin ETFs Would Do More Harm Than Good

Bitcoin Spot ETF South Korea
Last updated:
Author
Author
Tim Alper
About Author

Tim Alper is a British journalist and features writer who has worked at Cryptonews.com since 2018. He has written for media outlets such as the BBC, the Guardian, and Chosun Ilbo. He has also worked...

Last updated:
Why Trust Cryptonews
Cryptonews has covered the cryptocurrency industry topics since 2017, aiming to provide informative insights to our readers. Our journalists and analysts have extensive experience in market analysis and blockchain technologies. We strive to maintain high editorial standards, focusing on factual accuracy and balanced reporting across all areas - from cryptocurrencies and blockchain projects to industry events, products, and technological developments. Our ongoing presence in the industry reflects our commitment to delivering relevant information in the evolving world of digital assets. Read more about Cryptonews

A top South Korean economic think tank has poured cold water on the idea of Seoul approving a Bitcoin (BTC) or Ethereum (ETH) spot exchange-traded fund (ETF).

The comments came in a paper by the Korea Institute of Finance researcher Lee Bo-mi, News1 reported.

Lee claimed that “introducing cryptoasset-linked products” could undermine South Korea’s “financial stability.”

South Korean Economic Think Tank: Bitcoin ETF Approval Carries Risks

Lee claimed that approving crypto-linked financial products would likely spike crypto prices.

And this would lead to “a significant amount of capital to move to the virtual asset market,” Lee said.

This, the researcher explained, would likely “increase inefficiency” in the “resource allocation” space.

Conversely, when crypto prices fall, Lee warned, the “liquidity of the financial markets and the soundness of financial companies” could “suffer.”

Lee opined that more research was needed on the “benefits and drawbacks” of green-lighting cryptoasset-linked products.

Politicians have promised to tackle the issue. But regulators appear to be favoring a more cautious stance.

Regardless, financial and crypto advocates have urged Seoul to follow Washington and Hong Kong’s lead in approving crypto spot ETFs.

Crypto ‘Still Too Volatile’ for South Korean Financial Sector, Researcher Claims

Lee argued that the drawbacks of crypto spot ETF approval would outweigh the benefits, explaining:

“There is a general lack of understanding about the value of cryptoassets. Tokens are highly volatile. Incorporating products that use these as underlying assets into the [South Korean] institutional system creates the perception among market participants that virtual assets have a proven [track record].”

The researcher said that there was “a high possibility” that associated risks would “intensify.”

Lee argued that “to reduce risks related to virtual asset-based ETFs,” regulators would need to ensure they were “well prepared” before they grant approval.

And Lee claimed that even if regulators wanted to create the right conditions for BTC or ETH spot ETF approval, “there are limits to the effectiveness of the investor protection measures” they could introduce.

South Korea currently allows recognized brokers to handle Bitcoin futures ETFs. However, the law still prohibits the issuance or brokerage of spot ETFs.

More Articles

Altcoin News
Further Punishment Awaits South Korean Civil Servant Who Stole $416k to Buy Crypto
Tim Alper
Tim Alper
2025-02-17 03:00:00
Cryptonews Reports
Lawyer Confirms US Has Dropped Vinnik Case, Client ‘Has a Clean Slate’
Tim Alper
Tim Alper
2025-02-16 23:30:00
Crypto News in numbers
editors
Authors List + 66 More
2M+
Active Monthly Users Around the World
250+
Guides and Reviews Articles
8
Years on the Market
70
International Team Authors