Reportedly, the South Korean Think Tank has cautioned against the Bitcoin ETFs remarking that this Bitcoin ETF Approval could do more harm than good. As per the Korea Institute of Finance and researcher Lee Bo-mi, cryptocurrency ETs, especially the Bitcoin (BTC) and Ethereum (ETH) spot exchange-traded funds (ETFs) (spot ETF approval) in South Korea is not a good sign for the future.
Reasons For Concern
- Lee argues that introducing crypto asset-linked financial products could pose risks to South Korea’s financial stability.
- Approval could potentially lead to a surge in crypto prices, attracting a huge amount of capital into virtual asset markets.
- This influx of capital due to spot ETF approval may result in inefficiencies in resource allocation within the financial system.
Drawbacks Of Bitcoin ETFs
Here are the potential drawbacks of crypto spot ETF-
- Lee warns that during periods of crypto price declines, there could be negative impacts on financial market liquidity and the stability of financial institutions.
- The researcher emphasizes the need for thorough research to weigh the benefits and drawbacks before considering the green-lighting of crypto asset-linked products.
- While some politicians have expressed interest in tackling the issue, regulatory authorities in South Korea appear inclined towards a cautious approach.
Are Cryptocurrencies Still Volatile?
Lee Bo-mi asserts that despite calls from financial and crypto advocates to follow the lead of Washington and Hong Kong, South Korea views cryptocurrencies as still too volatile for mainstream financial sector integration.
- The researcher argues that the inherent volatility of tokens raises doubts about their suitability as underlying assets for institutional financial products.
- Incorporating such volatile assets into South Korea’s institutional framework could mislead market participants into perceiving virtual assets as more stable or proven than they are.
- Lee expresses concerns that the risks associated with crypto asset-based ETFs could intensify without adequate regulatory preparation and investor protection measures.
- South Korean regulations currently allow recognized brokers to handle Bitcoin futures ETFs, but spot ETF issuance or brokerage remains prohibited under current laws.
And that’s a wrap! Stay tuned at ReadingCrypto for more such updates!
