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South Korean Think Tank Warns Against Approving Spot Crypto ETFs, Citing Financial Stability Risks

A South Korean think tank specializing in finance and economics has advised against approving 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 global experiences with spot Bitcoin and Ether ETFs indicate that the potential losses outweigh the benefits.

Lee emphasized that the introduction of spot crypto ETFs could jeopardize financial stability in South Korea.

The paper suggested that the approval of these ETFs could lead to a significant influx of capital into the crypto market, especially if digital asset prices rise.

This, in turn, could cause inefficiencies in resource allocation.

Furthermore, Lee pointed out that financial market liquidity and the health of financial companies could deteriorate when asset prices fall.

Given these risks, Lee stressed the need for more thorough research into the potential consequences of introducing spot crypto ETFs.

The researcher currently believes that the potential losses exceed any possible benefits.

Lee also highlighted the ongoing lack of understanding of digital asset value and their high volatility.

The introduction of such products might mislead market participants into perceiving them as “proven assets.”

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Lee also warned that risks would increase with the introduction of spot crypto ETFs.

He argued that robust regulatory measures must be in place to mitigate these risks.

Lee underscored the uncertainty surrounding the impact of digital assets on investors and the financial market, urging regulators to develop comprehensive measures before proceeding with the approval of such ETFs.

In response to growing concerns, South Korea’s financial regulator is tightening its rules on crypto assets to enhance user protection.

Beginning July 19, registered crypto exchanges in South Korea will be required to evaluate the tokens listed on their platforms.

These exchanges must determine whether to continue supporting or delist these tokens.

Under the new regulations, all registered exchanges must review over 600 listed crypto assets.

Exchanges that fail to comply with the new regulations will face severe penalties, including fines and potential jail sentences.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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