Spot Crypto ETFs Still Distant for South Korea Despite High Demand
South Korean investors are left waiting for spot cryptocurrency ETFs to become a reality despite the US Securities and Exchange Commission’s (SEC) recent approval of funds linked to the price of Ethereum.
On May 23, the US SEC granted approval for eight spot ether ETFs, potentially opening the door for their trading later this year.
The decision followed the SEC’s groundbreaking approval of spot Bitcoin ETFs four months earlier.
In contrast, South Korea, known for its high demand for cryptocurrencies, still has a long way to go before spot crypto ETFs become accessible to local investors.
In the first quarter of this year alone, the Korean won emerged as the most widely used currency globally for trading crypto on centralized exchanges, boasting a cumulative trade volume of $456 billion, surpassing the US dollar volume of $445 billion.
However, the local authorities remain cautious about the crypto market.
When Bitcoin-based ETFs were listed in the US earlier this year, the Financial Services Commission (FSC), South Korea’s local regulator, expressed concerns that brokering spot crypto ETFs could contradict the government’s stance.
The Capital Market Act in South Korea does not currently specify virtual assets as underlying assets for securities.
While industry experts believe that spot crypto ETFs could be introduced in South Korea if the FSC widens the definition of underlying assets, they argue that a revision of the existing law is necessary.
A key point of contention lies in clarifying the role of custody.
Unlike futures-based crypto ETFs, fund issuers of spot ETFs must hold custody of the cryptocurrencies through contracts with exchanges or other service providers.
Kim Kab-lae, a senior research fellow at the Korea Capital
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