South Korean think group warns about crypto ETFs

Bo-mi Lee, a South Korean researcher, emphasizes the volatility and risks associated with cryptocurrency, advocating for additional research and regulatory measures.

The East Asian nation was opposed to the approval of spot crypto exchange-traded funds (ETFs) by a finance and economics-focused think tank in South Korea.

Bo-mi Lee, a researcher at the Korea Institute of Finance, contended in a paper that the results of spot Bitcoin ETFs in a variety of jurisdictions worldwide indicate that the losses outweigh the benefits.

The researcher contended that the introduction of spot crypto ETFs in the country could have a detrimental impact on its financial stability. A substantial quantity of capital will be directed into the crypto market when the spot ETFs are approved and digital asset prices increase, as per the paper.

Lee contended that this would lead to inefficiencies in resource allocation. The researcher also observed that the health of financial companies and the liquidity of the financial market will decline as prices decrease.

The researcher stated that the country must conduct additional research to determine the potential benefits and drawbacks of introducing spot crypto ETFs in light of these factors. Presently, the researcher maintains that the negative consequences will surpass the potential advantages.

Lee also stated that the value of digital assets is still not well understood, and the assets are characterized by high volatility. The researcher contended that the introduction of such products would induce market participants to perceive them as “proven assets.”

Additionally, Lee stated that there would be an increase in the associated hazards. According to the researcher, it is imperative that regulatory measures are adequately prepared to mitigate these hazards. Lee also stated that the financial market and investors are still apprehensive about the impact of digital assets. Before setting up spot crypto exchange-traded funds (ETFs), regulators must implement adequate safeguards.

In order to safeguard consumers, South Korea’s financial regulator is implementing more stringent regulations regarding cryptocurrency assets. Regulative evaluations of tokens listed on registered crypto exchanges in the country will be mandatory beginning on July 19.

Also Read: Japanese Metaplanet plans 1B yen bond sale for more Bitcoin