South Korean financial regulators are feeling the pressure to reconsider their stance on digital assets following the recent approval by the United States Securities and Exchange Commission (SEC) of spot Ethereum exchange-traded funds (ETFs). This decision comes after the SEC’s earlier approval of Bitcoin ETFs in January 2024, signaling a significant move towards integrating digital currencies into traditional finance.
The SEC’s approval of ETFs for Ethereum, the second-largest cryptocurrency, on May 24, 2024, is seen as a major win for digital asset investors and developers. It paves the way for further integration of digital assets into traditional finance. Matthew Sigel, Head of Digital Assets Research at VanEck, believes that these developments will bring advancements for investors and developers in the digital asset sphere. ETFs, which are financial tools that allow investors to access a collection of securities, are bridging the gap between conventional financial systems and the growing digital asset industry.
However, in South Korea, the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) maintain a more cautious stance compared to their American counterparts. The FSC insists that ETFs comply strictly with the Capital Markets Act, which requires ETFs to be linked exclusively to traditional underlying assets like securities, international currencies, and commodities.
Critics argue that South Korea’s policies on digital assets need revision. Xangle, a leading digital currency data provider based in Seoul, criticized the ban on digital assets in the traditional securities market as outdated and called for it to be updated to accommodate the growing significance of digital assets in modern finance. Jung Eui-jung, head of the Korean Stockholders’ Alliance, expressed concerns that regulatory hesitance could lead investors to transfer their capital to more progressive US markets, potentially making the US a leader in the trading of less commonly traded cryptocurrencies.
The process of enabling spot Ethereum ETFs to begin trading in the US involved the SEC’s approval of the 19b-4 form and the activation of S-1 registration statements. This review process, which involves iterations between the SEC and potential issuers, may take several weeks.
In addition to the SEC’s actions, the US House of Representatives recently passed the Financial Innovation and Technology for the 21st Century Act (FIT21), the first legislation of its kind to be considered by the House. This bill aims to provide comprehensive regulation of the crypto industry, giving enhanced authority and funding to the Commodity Futures Trading Commission (CFTC) to oversee crypto assets classified as digital commodities. This legislative victory is seen as a significant political triumph within the crypto community.
The market response to these developments has been mixed, with Ether experiencing a slight increase of 0.69% over the past 24 hours to $3,753.09, while Bitcoin saw an increase of 0.98% to $69,221. This fluctuation highlights the ongoing evolution of the market as it responds to a changing regulatory environment, suggesting cautious optimism among investors as they navigate this new terrain.
