US Approval Sparks Debate

The US Securities and Exchange Commission's approval of spot Ethereum ETFs has ignited significant pressure on South Korea's financial regulators to greenlight similar crypto exchange-traded funds.

Last week's approval of these ETFs marked a dramatic reversal for the US market. Up until then, most market participants were expecting a rejection, at least in May.

South Korea's Hesitation

According to the Korea Times, the country's Financial Services Commission (FSC) and Financial Supervisory Service (FSS) are reluctant to permit crypto trading on its traditional securities market.

The FSC cited the Capital Markets Act to justify its skepticism towards crypto ETFs. The Act restricts ETFs to underlying, traditionally tangible financial assets or securities like international currencies or commodities.

Voices of Advocacy

Jung Eui-jung, head of the Korean Stockholders' Alliance, reportedly called for the authorities to follow the US and approve ETFs for Bitcoin and Ethereum.

Jung believes this step is crucial to preventing investors in traditional finance and digital assets from leaving Korea. "Who would want to invest their money in a market that lags behind the fast-changing regulatory landscape?" Jung said.

Current Limitations

South Korean crypto investors currently don't have the option to trade spot Bitcoin and Ethereum ETFs. Additionally, financial authorities in January shut down any hopes for regulations allowing sales of Bitcoin futures ETFs shortly.

In March, Lee Bok-hyun, the Financial Supervisory Service governor, acknowledged the internal debate surrounding virtual assets.

While he holds an optimistic view, others within the agency express more caution, he said. Lee stressed the importance of considering all viewpoints and having open discussions before moving forward.

"Among authorities, I am one of those who are positive about virtual assets, while there are others who are wary, and we need to hear their opinions as well. We are internally discussing it," Lee said.

Political Implications

South Korea's robust cryptocurrency market became a central theme in April, leading up to the country's parliamentary elections. Both major political parties saw an opportunity to woo voters with crypto-centric promises.

President Yoon Suk Yeol's People Power Party acknowledged the growing influence of the crypto industry and pledged to delay the implementation of a digital asset tax, a move likely to resonate with crypto investors.

In contrast, the opposition Democratic Party focused on loosening restrictions on ETFs, including those allowing investment in US Bitcoin products. This strategy aimed to attract voters seeking more accessible access to cryptocurrency investments.