According to a new report from a leading South Korean financial research institution, the implementation of spot cryptocurrency exchange-traded funds (ETFs) could bring more harm than good to the country's economy.
The Korea Institute of Finance says in its recent report that allowing such products could have negative effects such as inefficient resource allocation, increased exposure to cryptocurrency-related risks in the financial market and weakened financial stability.
The think tank has also warned that the introduction of cryptocurrency ETFs could divert a large amount of capital away from traditional industries, making the local financial market more susceptible to crises in the volatile cryptocurrency sector and potentially damaging investor confidence in the market and regulators.
Therefore, the report concludes that, at this time, the introduction of cryptocurrency ETFs would not be beneficial.
However, the think tank has acknowledged that if cryptocurrencies are better defined and established as unique financial assets, cryptocurrency ETFs could serve as a viable store of value.