Real-time charts for bitcoin and other digital currencies traded in Korea are displayed on an electronic board at crypto exchange Bithumb in Seoul's Seocho District, in this photo taken on April 18. Yonhap

Korean financial regulators are under growing pressure to approve exchange-traded funds (ETFs) for crypto assets, after the U.S. securities regulator gave the green light on creation of ETFs for ethereum, Thursday (local time).

The decision made by the U.S. Securities and Exchange Commission's (SEC) concerning ethereum, the world's second-largest cryptocurrency, comes after the SEC allowed bitcoin, the world's largest cryptocurrency to be traded as ETFs in January.

ETFs are baskets of securities that are only available for trading on the traditional securities market.

In that regard, the SEC's measures in favor of bitcoin and ethereum mark a significant shift in lowering the barriers between the traditional finance and digital asset industries.

In a stark contrast, Financial Services Commission (FSC) and Financial Supervisory Service (FSS) are hesitant to open the door for trading crypto assets on the traditional securities market.

A photo illustration of ethereum, the world's second-largest cryptocurrency / Reuters-Yonhap

Citing the Capital Markets Act, the FSC said ETFs deal only with underlying assets, which refers to the real financial assets or the security that a financial derivative is based on. These include international currencies and commodities.

"Under the circumstances, the SEC's Thursday decision on ethereum is anticipated to press Seoul's financial regulators to reconsider its regulations against digital assets," said Xangle, a Seoul-based data and information provider on digital currencies.

It called the ban on digital assets in the traditional securities market "outdated," especially considering the government committed to boosting the undervalued Seoul stock market in the name of tackling the so-called "Korea discount."

A rigid regulatory policy is considered a reason behind lower valuation of the Korean stocks compared to global peers.

Jung Eui-jung, head of the Korean Stockholders' Alliance, reckoned following the U.S. path and endorsing ETFs for bitcoin and ethereum is critical "in order to ensure that investors, both in traditional finance and digital assets, do not exit Korea."

"Who would want to invest their money in a market that lags behind the fast-changing regulatory landscape?" Jung said.

He warned that investors may pull out their cash to invest in the U.S. markets instead if the Seoul regulators "continue to make little progress while the U.S. takes bigger strides and moves forward" on digital assets.

"It will be a matter of time for the U.S. to fully open the door for other less-traded cryptocurrencies and that Korea at least should approve ETFs for bitcoin and ethereum," Jung added.

Meanwhile, the main opposition Democratic Party of Korea (DPK), in line with April general election pledgees, is anticipated to address a need to lower barriers on digital assets when the next National Assembly begins.

Separately, FSS Governor Lee Bok-hyun deemed that the mood for a public discussion on whether to allow cryptocurrencies in the traditional finance may be set up in the second half of the year.