South Korea’s exchange chairman, Eun-Bo Jeong, has shown interest in introducing crypto-based exchange-traded funds (ETFs) this year, aligning with the global demand for such products. During the Securities and Derivatives Market Opening Ceremony on Jan. 2, Jeong emphasized the necessity for innovative financial products to rejuvenate the country’s capital markets.
Jeong highlighted the economic challenges faced in the past year, including a shrinking domestic economy, diminished export growth, and geopolitical tensions. These issues have caused South Korea’s financial markets to fall behind their international counterparts. Inspired by the successful launch of Bitcoin-related financial products globally, the exchange is looking into new avenues, such as crypto-related ETFs, to address these concerns.
This announcement signifies a potential shift from South Korea’s previous stance. Last year, the Financial Supervisory Service (FSS) restricted asset managers from offering ETFs linked to crypto-related firms like Coinbase. However, the prospect of crypto ETFs is uncertain due to regulatory obstacles. Ki Young Ju, CEO of CryptoQuant, has expressed doubts about the country’s readiness to approve such products.
Ju likened South Korea’s cautious regulatory approach to that of the US Securities and Exchange Commission (SEC) under Gary Gensler, where resistance to crypto ETFs delayed their adoption for over a decade until 2024.
On the other hand, the increasing success of global crypto ETFs may influence South Korea’s interest in these products. Bitcoin ETFs had a strong start in the United States, attracting significant investments in their first year of trading. According to SoSoValue data, the 12 ETF products have accumulated over $35 billion in inflows and are gaining acceptance among institutional investors.
Market experts anticipate further innovation in the ETF landscape this year, given the more favorable regulatory environment under the Donald Trump administration. Nate Geraci, president of the ETF Store, has predicted that the market could see the launch of combined Bitcoin and Ethereum ETFs, staking options for ETH funds, and broader diversification with assets like Solana entering the ETF space.
In conclusion, South Korea’s potential introduction of crypto-based ETFs reflects a broader trend towards embracing digital assets in traditional financial markets. Despite regulatory challenges, the success of global crypto ETFs and the evolving regulatory landscape may pave the way for South Korea to explore these innovative financial products further.