The report touches on the recent approval of spot crypto ETFs by regulators in countries such as the US, Hong Kong and the UK. However, Lee expresses doubts that these developments will provide the same benefits for South Korea.

One of Lee’s biggest concerns is the potential for spot Bitcoin ETFs to lead to financial instability. These ETFs, unlike traditional ETFs, will have to directly hold and actively trade crypto assets known for their high volatility, such as Bitcoin. This could cause the ETF to lose value and investors to suffer significant losses in case of sudden price drops in the crypto markets.

More importantly, Lee warns that the launch of spot Bitcoin ETFs could draw significant capital from traditional investment sectors. Crypto assets do not generate any cash flow, unlike fixed-income investment instruments such as stocks and bonds. This situation may lead to the withdrawal of resources from sectors that contribute to the country’s economic growth and an inefficient resource distribution in the long term.

The report emphasizes that the true value of crypto assets and the risks they bring are not yet fully understood. The launch of spot Bitcoin ETFs could lead investors to consider these assets as safe and stable as traditional financial products. However, this perception may be far from reality. This could further increase market risks and financial instability.

Lee also believes that spot Bitcoin ETFs will not significantly facilitate investment access. Investors already have access to Bitcoin and other crypto assets through cryptocurrency exchanges. Therefore, the advantages offered by ETFs appear to be limited.

The report emphasizes that prior to the launch of South Korea’s crypto ETFs, effective regulations must be established to reduce the risks associated with these products. However, Lee also points out the difficulty of regulating the rapidly developing cryptocurrency market and the new products that emerge.

Spot Bitcoin ETFs are not currently traded in South Korea. But the country’s left-wing Democratic Party recently launched an initiative to make US-based spot Bitcoin ETFs available locally. This initiative seems to aim to benefit from the rapid growth of the cryptocurrency market by ignoring the risks revealed by the KIF report.

In conclusion, the South Korean Financial Institute’s report highlights the serious risks that spot Bitcoin ETFs bring, despite their potential benefits. This development will raise important discussions about how South Korea will regulate and supervise the cryptocurrency market in the near future.