A South Korean finance and economics-focused think tank has raised concerns about the approval of spot crypto exchange-traded funds (ETFs) in the nation.
Bo-mi Lee, a researcher at the Korea Institute of Finance, argued in a report that the results of spot Bitcoin (BTC) and Ether (ETH) ETFs in various jurisdictions worldwide show that the disadvantages outweigh the advantages.
Spot crypto ETFs could threaten financial stability, the researcher stated. Lee explained that allowing spot crypto ETFs in the country could jeopardize its financial stability. The report emphasized that once the spot ETFs are given the green light, and digital asset prices increase, a significant amount of capital will pour into the crypto market.
Lee contended that this would lead to inefficiencies in resource allocation. The researcher also pointed out that when prices drop, financial market liquidity and the health of financial companies would deteriorate.
As a result of these concerns, the researcher suggested that the country should conduct further research into the potential advantages and disadvantages of allowing spot crypto ETFs. Currently, it is argued that the disadvantages will outweigh any potential benefits.
Lee also noted that there is still a lack of understanding of digital asset value and that these assets exhibit high volatility. The researcher suggested that introducing such products would create the impression among market participants that these are “proven assets.”
Moreover, Lee warned that risks would increase and emphasized the need for well-prepared regulatory measures to mitigate such risks. The researcher added that the impact of digital assets on investors and the financial market remains uncertain, and regulators must implement sufficient measures before introducing spot crypto ETFs.
In other news, South Korea is enhancing its regulations on crypto assets to safeguard users. As of July 19, registered crypto exchanges in the country are legally required to evaluate the tokens listed on their platforms. They must review the more than 600 crypto assets listed and are subject to severe penalties, including fines and jail sentences if they fail to comply with the new law.
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