South Korea has joined the cryptocurrency community when it comes to waiting for the US’ verdict on Bitcoin exchange-traded funds (ETF).
The nation’s sole bourse operator, Korea Exchange (KRX), admitted that it was carefully observing the constantly-unfolding crypto ETF scenario in the US. An official at the exchange – on condition of anonymity – told the Korean Herald that seeing the Securities and Exchange Commission’s (SEC) response to the bitcoin derivative products could assist KRX in understanding how they could move forward with similar investment offerings in South Korea. Excerpts from his statement:
“The US has been the front-runner on the cryptocurrency market and related derivatives, and there are strong voices supporting the launch of bitcoin ETFs within the market — which is why we are observing the progress and response of the US Securities and Exchange Commission’s decision on bitcoin ETFs.”
A Safer Bitcoin ETF
The comments from KRX official appears at a time when blockchain craze in South Korea is touching an all-time high. The South Korean government allocated 1 trillion won, which is close to $880 million, for blockchain research and development. The investment led to the launch of new age projects that would bring blockchain to everyday lives.
At the same time, the South Korean workers, while facing limited investment opportunities, ventured into cryptocurrencies as an alternative. As of July 2018, the crypto population in South Korea had contributed to 30% of the total crypto trading volume, per a Cindicator report.
At the time of this writing, trading the crypto assets is legal in South Korea. Nevertheless, regulators have bolstered their scrutiny against the crypto activities. For instance, traders cannot sell or purchase cryptocurrencies anonymously anymore per the law.
According to Lee Kyung-ho, a scholar at Korea University, research blockchain could also allow the government to introduce safer bitcoin derivates to the investors in South Korea. He said:
“With the government expanding its investment in research and development of blockchain technology, the projects are expected to minimize or eliminate the risk of integrating ETF transactions in the cryptocurrency market.”
Meanwhile, in the United States
The SEC is now reviewing two Bitcoin ETF applications: one from VanEck-SolidX with CBOE BZX Exchange and the other from Bitwise Asset Management with NYSE Arca. The US securities regulator expects to announce its verdict by April 5, 2019.
According to SEC commissioner Robert J Jackson Jr., there is a strong likelihood of SEC approving a Bitcoin ETF soon. At the same time, the commissioner expressed concerns about the ETF applications submitted to date.
“Getting the stamp of approval from the deepest and most liquid capital markets in the world is hard, and it should be. Once we put the stamp of the United States Securities and Exchange Commission on an investment; once we make it available to everyday mom and pop investors, we are taking risks that Americans can get hurt.”
So far, SEC has rejected nine Bitcoin ETF applications citing market manipulation as one of its main concerns. In response, the applicants had developed regulated bitcoin price indexes to ensure their ETFs derive bitcoin’s value from trustworthy sources.
The KRX official supported the SEC’s stance. He said that a regulated “solid index” was a missing point in all the bitcoin ETF applications. Excerpts from his/her statement:
“Providing a solid index required for the launch of such ETFs and of its role when it is commercialized and integrated into the market is being discussed expansively at the KRX because it would eventually concern investor protection issues.”
Investors believe a regulated Bitcoin ETF would allow big investors to pour millions of dollars in the space without worry. Should that happen, the value of the ETF’s underlying asset – the bitcoin – would increase massively. Gabor Gurbacs, the director of Digital Assets Strategy at VanEck, cited a Gold ETF to explain the bullishness. He said:
“Our gold ETFs are already in a few billion dollars range,” Gurbacs added. “There are gold ETFs in $10 billion range as well. I wouldn’t be surprised if a bitcoin ETF gets in a few billion dollars range.”
With the Korean exchange also looking into Bitcoin ETF, it could also prove bullish for bitcoin as a standalone asset, which is currently in its most extended bear cycle.
Bitcoin is trading at $3,937 at the time of the writing.
Last modified: March 4, 2021 2:54 PM