The SEC’s recent approval of Ethereum ETFs has ignited competition among global financial markets, particularly regarding regulatory stances on digital assets. Excitement surged as Hong Kong embraced these ETFs, maintaining a dynamic financial scene. Meanwhile, South Korea, a significant player in the crypto world, is deliberating whether to approve these financial instruments.

Local reports indicate that Korean regulators are under pressure to approve cryptocurrency ETFs following the U.S. SEC’s endorsement of spot Ethereum ETFs. This SEC decision may prompt Seoul’s financial authorities to reassess their cautious approach to digital assets. However, the Financial Services Commission (FSC) and Financial Supervisory Service (FSS) remain reluctant to permit crypto asset trading in the mainstream securities market.

Unlike the U.S., which approved Bitcoin ETFs in January 2024 and Ethereum ETFs in May 2024, South Korean regulators have been wary of integrating digital assets into their traditional financial systems. The FSC asserts that ETFs must comply with the Capital Markets Act, limiting them to conventional assets and arguing that incorporating digital assets could destabilize the financial system.

Critics argue that South Korea’s regulations are outdated and do not acknowledge the increasing importance of digital assets in contemporary finance. Xangle, a leading digital currency data provider in Seoul, has criticized the ban on digital assets in traditional securities markets and advocates for regulatory reforms to align with global trends.

The global acceptance of ETH ETFs, reinforced by Hong Kong’s approval, has heightened pressure on Korean regulators to reconsider their stance on digital assets. Jung Eui-jung, head of the Korean Stockholders’ Alliance, emphasizes the need for Korea to follow the U.S.’s lead in approving Bitcoin and Ethereum ETFs. He cautions that failing to do so could drive investors to transfer their funds to U.S. markets, potentially weakening Korea’s position in the global financial arena.

Restricting crypto could push local investors towards the U.S. market, adversely affecting Korea’s financial health. A balanced approach is crucial to foster innovation and attract capital inflows.