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South Korea Takes First Steps Towards Launching Bitcoin ETF

South Korea is exploring a Bitcoin ETF, is this a good thing?

Earlier this week, South Korea’s largest bank, KB Bank, announced that it was forming a committee with a view to launching the country’s first Bitcoin ETF (exchange-traded fund).

Bank Looks Offshore for Assistance

A spokesperson for the bank commented that:

We will launch virtual asset-themed equity funds as soon as possible. We plan to hold a virtual asset conference for customers and publish periodicals.

Hong-Gon Kim, KB Asset Management’s lead for the Index Quant management division

KB Financial Group, is the nation’s largest bank, with close to $520 billion assets under management as of Q3 in 2021. The latest plan to launch an ETF, as well as a financial product which outsources investment management, is said to include the likes of Grayscale and Fidelity Management, although this is yet to be confirmed.

Is a Bitcoin ETF a Good Thing?

To the average retail investor, ETFs are familiar, low-cost and easy to understand. By providing exposure to the spot price of bitcoin, ETFs would undoubtedly broaden the investor base and increase mainstream adoption. While those things are innately good, there are some notable trade-offs.

Critically, if you are a holder of a Bitcoin ETF, you don’t own your bitcoin since the entity will hold the keys. It’s more like an IOU. It’s a perfect illustration of “not your keys, not your coins”. If the financial institution goes down, your bitcoin will likely disappear. If for whatever reason, the institution is instructed to prevent you from withdrawing your investment, there’s nothing you can do about it.

The idea behind Bitcoin is that it can be self-custodied, unlike other financial assets which are akin to fiat IOUs. It is unconfiscatable and uncensorable. As long as you hold the keys to your bitcoin, nobody else will have access. A Bitcoin ETF can therefore be said to undermine the very reason for wanting bitcoin – a digital asset incapable of seizure or censorship.

In the end, it’s up to the individual investor to decide what’s best. Most Bitcoiners however would never dream of holding a Bitcoin ETF as it defeats Bitcoin’s raison d’etre.

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