Regulation
US approves Ethereum ETF, putting pressure on Korean regulators
The recent decision by the United States Securities and Exchange Commission (SEC) approve Ethereum spot exchange-traded funds (ETFs) is putting considerable pressure on South Korean financial regulators to review their digital asset policies.
The move follows the SEC’s earlier January 2024 approval of Bitcoin ETFs, signaling a significant shift toward the integration of digital currencies as part of traditional finance.
Implications for Ethereum and other digital asset investors
On May 24, 2024, the SEC approved the creation of ETFs for Ethereum, the world’s second largest cryptocurrency, following its earlier approval of Bitcoin ETFs in January 2024. This approval is considered a significant victory for investors and developers of digital assets, paving the way for the further integration of digital assets into traditional finance.
Matthew Sigel, head of digital assets research at VanEck, noted that these developments are likely to herald further advances for investors and developers in the digital asset space. ETFs, which are financial tools that allow investors to interact with a collection of securities, are increasingly bridging the gap between conventional financial systems and the booming digital asset sector.
In South Korea, however, the Financial Services Commission (FSC) and Financial Supervisory Service (FSS) maintain a more cautious stance than their U.S. counterparts.
The FSC, a government agency that oversees financial institutions and markets, insists that ETFs strictly comply with capital markets law. This legislation requires ETFs to be linked exclusively to traditional underlying assets such as securities, international currencies and commodities, the fundamental elements of financial derivatives.
Criticism of South Korean politics
The Financial Services Commission, a government agency responsible for supervising and regulating financial institutions and markets in South Korea, released a new update to the Virtual Asset User Protection Act in early February.
However, the Korea Times reported that Xangle, a leading Seoul-based digital currency data provider, criticized the ban on digital assets in the traditional securities market as outdated, arguing that it should be revised to take into account the growing importance of digital assets in modern finance.
Source: Xangle X Profile
Jung Eui-jung, head of the Korean Shareholders Alliance, echoed the sentiment, emphasizing the urgency for Seoul to emulate the United States in approving Bitcoin and Ethereum ETFs. He expressed concern that continued regulatory hesitation could prompt investors to shift their capital to more progressive U.S. markets, potentially positioning the U.S. as a leader in trading other less commonly cryptocurrencies. negotiated.
The process for Ethereum spot ETFs to begin trading in the United States involved the SEC’s approval of Form 19b-4, followed by the activation of S-1 registration statements. This review process, which is expected to include several iterations between the SEC and potential issuers, could extend over several weeks.
Legislative Support for Crypto Regulation
Building regulatory momentum, the U.S. 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.
The bill, passed by 279 votes to 136, aims to provide comprehensive regulation of the crypto industry. Notably, it gives the Commodity Futures Trading Commission (CFTC) increased authority and funding to oversee crypto assets classified as digital products.
This legislative victory is seen by many in the crypto community as a crucial political triumph. The evolving regulatory landscape should reassure institutional investors, increasing their comfort level with investing in crypto and associated financial instruments, including Bitcoin-related stocks.
At the time of publication, the market response to these developments was mixed, with Ether seeing a slight increase of 0.69% over the past 24 hours to $3,753.09, while Bitcoin saw an increase by 0.98% to $69,221. This fluctuation underscores the continued evolution of the market, which responds to an ever-changing regulatory environment, suggesting cautious optimism on the part of investors as they navigate new terrain.