South Korean research institute warns about the risks of crypto ETFs

A South Korean finance and economics-focused think tank has opposed the approval of spot crypto exchange-traded funds (ETFs) in the country.
Bo-mi Lee, a researcher at the Korea Institute of Finance, argued in a paper that based on the results of spot Bitcoin (BTC) and Ether (ETH) ETFs in various jurisdictions around the world, the losses outweigh the benefits.
Lee expressed concern that the introduction of spot crypto ETFs in South Korea could undermine the country’s financial stability. According to the paper, if spot ETFs are approved and digital asset prices rise, a significant amount of capital will flow into the crypto market.
This, Lee argued, would lead to inefficiencies in resource allocation and negatively impact financial market liquidity and the health of financial companies when prices fall.
Therefore, the researcher stressed the need for more research into the potential losses and benefits of introducing spot crypto ETFs, as currently, the losses are projected to be greater than the potential benefits.
Lee also emphasized the lack of understanding of digital asset value and the high volatility exhibited by these assets. Introducing such products could lead market participants to believe they are “proven assets,” leading to increased risks. Regulatory measures should be well-prepared to mitigate these risks, and the impact of digital assets on investors and the financial market remains uncertain.
In related news, South Korea is tightening its regulations on crypto assets to protect users. Starting on July 19, registered crypto exchanges in the country will be legally required to evaluate the tokens listed on their platforms. Those who fail to comply with the rules will face severe penalties, including fines and jail sentences.