 ▲ Bitcoin (BTC) Exchange Traded Fund (ETF) © Coin Leaders |
This year, Bitcoin and Ethereum spot exchange-traded funds (ETFs) were approved in the United States and other countries, but at this point, an analysis showed that introducing virtual asset-linked products in Korea would cause more harm than good.
Bo-mi Lee, a researcher at the Korea Institute of Finance, said this in the ‘Review on Approval of Overseas Virtual Asset Spot ETF’ on the 23rd.
According to the report, the United States, Hong Kong, and the United Kingdom approved Bitcoin and Ethereum spot ETF transactions this year, but Korea prohibits the issuance or brokerage of virtual asset spot ETFs.
Researcher Lee cited the advantages of allowing the issuance and trading of virtual asset-linked products, such as Bitcoin spot ETFs, in that investors can receive institutional protection and related financial companies can benefit.
On the other hand, a disadvantage of introducing virtual asset-linked products is that when virtual asset prices rise, a significant amount of capital may move into the virtual asset market, which can increase inefficiency in resource allocation.
If the issuance and trading of virtual asset-based ETFs is allowed, a significant portion of Korea's capital may move from investments that generate future cash flows, such as corporate investment, to virtual assets, leading to inefficient allocation of resources.
In particular, if a financial company directly operates a virtual asset spot ETF, more domestic capital may move into the virtual asset market due to virtual asset spot trading.
Researcher Lee also said that when virtual asset prices fall, it can worsen financial market liquidity and the soundness of financial companies, and reduce trust in financial markets and regulators, thereby undermining financial stability.
When virtual asset prices fall, financial companies that operate linked products and pension funds invested in them liquidate related positions and sell traditional assets to secure liquidity, causing a decline in the prices of traditional assets, which will spread risk to the financial market. It is pointed out that it can be done.
Additionally, if individual investors invest heavily in virtual asset-linked products without sufficient understanding of financial market mechanisms and virtual assets, fund runs may occur in response to shocks from virtual assets, making the financial system vulnerable.
Researcher Lee said, “At a time when there is a lack of understanding of the value of virtual assets and the price volatility of virtual assets is high, incorporating products with these as underlying assets into the institutional system creates the perception among market participants that virtual assets are proven assets.” “There is a high possibility that the risks mentioned above will expand,” he said. “We believe that the harm from introduction will be greater than the benefit.”
