A South Korean researcher looks at the risks of spot crypto ETFs
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The latest report issued by the Korea Finance Institute warns against the introduction of kriptovalyutnoy exchange-traded funds (ETFs) in South Korea, arguing that the risks outweigh the potential benefits at this time.
Institute researcher Bo-Mi Lee analyzed the recent approvals of spot bitcoin and ethereum ETFs in countries such as the United States, Hong Kong, and the United Kingdom. Despite growing demand, Lee argues that South Korea's adoption of similar products could undermine the financial system.
The report highlights several key issues:
Inefficiency of resource allocation: If the price of crypto increases, a large amount of capital may flow into the crypto market, leading to an inefficient distribution of resources.
Market Volatility Risks: During price downturns, crypto ETFs may adversely affect financial market liquidity and the health of financial institutions.
Lack of awareness: There is still insufficient awareness of crypto valuation, with high price volatility.
Premature Legitimacy: Promoting crypto ETFs through traditional financial channels can give investors a false sense of security about these assets.
Lee urges regulators that the crypto sector needs a more comprehensive study of the potential gains and losses associated with spot crypto ETFs, particularly for South Korea's domestic crypto market. The report suggests that the disadvantages may currently outweigh the advantages.
Lee argues that the introduction of crypto-based products at this point, when understanding of the value of crypto is lacking and price volatility is high, can act as a proven asset and expand. Accidents.
Lee (roughly translated from Korean) said, “While virtual assets are growing and various products are being developed, there are limits to establishing adequate regulation and investor protection because the impact of virtual assets on investors and the financial market is uncertain” (roughly translated from Korean).
While acknowledging that crypto ETFs can increase protection for investors and generate profits for financial firms, he argues that stronger regulatory measures should be put in place before considering their introduction. The researcher cited challenges in developing comprehensive regulations and investor protections due to the volatility of the crypto market.
This cautious stance is consistent with South Korea's broader efforts to tighten cryptocurrency regulations. From July 19, crypto exchanges registered in the country will be legally required to regularly review the tokens listed on the platform, taking advantage of the possibility of canceling some assets. This move aims to improve user protection in the rapidly changing crypto landscape.
The global financial sector continues to transition from crypto to traditional markets. Under these circumstances, the South Korean think tank's approach reflects careful consideration of both the opportunities and risks associated with these new financial products.
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