Researcher Bo-mi Lee Emphasizes Volatility and Regulatory Needs

A finance and economics-focused think tank in South Korea has advised against the approval of spot crypto exchange-traded funds (ETFs) in the nation. Bo-mi Lee, a researcher at the Korea Institute of Finance, highlighted the volatility and risks associated with cryptocurrencies, calling for more research and regulatory measures.

Global Experience Shows More Losses than Gains

In her paper, Lee argued that the experiences with spot Bitcoin (BTC) and Ether (ETH) ETFs in various countries show that the losses often outweigh the benefits. The introduction of spot crypto ETFs, she contended, could undermine South Korea’s financial stability.

Potential Risks to Financial Stability

Lee explained that approving spot crypto ETFs could lead to significant capital inflow into the crypto market as digital asset prices rise. This could result in inefficient resource allocation and exacerbate financial market liquidity issues, ultimately harming the health of financial companies when prices fall.

Call for More Research and Understanding

Due to these potential issues, Lee stressed the need for thorough research into the risks and benefits of spot crypto ETFs. She argued that, at present, the potential losses appear greater than the benefits. Additionally, Lee pointed out that there is still a limited understanding of the true value of digital assets, which are known for their high volatility. Introducing such products might mislead market participants into believing these assets are “proven.”

Regulatory Measures Needed

Lee also emphasized that the introduction of spot crypto ETFs would increase risks, and she called for well-prepared regulatory measures to mitigate these risks. She noted the uncertainty surrounding the impact of digital assets on investors and the financial market, urging regulators to establish sufficient measures before approving such ETFs.

Stricter Rules for Crypto Exchanges in South Korea

In related news, South Korea’s financial regulator is tightening rules on crypto assets to protect users. Beginning July 19, registered crypto exchanges will be legally required to evaluate the tokens listed on their platforms. They must decide whether to continue supporting or delist these tokens, reviewing over 600 crypto assets.

Severe Penalties for Non-Compliance

Exchanges that fail to comply with the new regulations will face severe penalties, including fines and potential jail sentences. This move reflects the country’s effort to ensure better oversight and protection for crypto investors.

Source: Cointelegraph