On Wednesday, June 4, Lee Jae-Myung, leader of the South Korea Democratic Party, beat Kim Moon-Soo, the outgoing conservative leader to become the new president of the country. This user-friendly crypto leader had proposed several policies during his campaign to support the cryptocurrency industry, aimed at obtaining the support of around 15 million cryptographic investors nationally.
Three strategic directions describe the future of the cryptography of South Korea
Lee Jae-Myung considers virtual assets as a basic element in the conduct of national financial innovation and, for the first time, include them in political commitments at the presidential level. Its main campaign promises concerning the cryptographic industry include:
- Promote the legalization of punctual cryptocurrency ETF: Lee has expressed its intention to actively promote the legalization of Spot cryptocurrency, offering investors more diverse and compliant investment tools. Unlike FNB in the long term, the FNB spots directly reflect the cash-5-year-old cash price, helping to expand market participation, improve the convenience of investments and improve market transparency.
- Allowing institutional investors to legally enter the cryptographic asset market: it is committed to softening the restrictions on institutional investors, in particular large public funds such as the National Pension Fund, allowing them to invest in certain cryptocurrencies and their derivatives. This decision should introduce capital in the longer term, improve the liquidity and stability of the market and promote the development put across the cryptographic industry.
- Supporting the development of the Korean market Won Stablecoin: in a political discussion with the creators of Youtube, Lee stressed that South Korea should vigorously support the development of a stabing market based on the Korean won to “prevent the national wealth of flowing abroad”. He stressed that the promotion of Korean Won Stablecoin not only helps maintain national financial sovereignty but also injects vitality into the digital economy of South Korea, improving the competitiveness of local digital assets.
In particular, the National South Korea Fund pension, one of the greatest public pension funds in the world, manages assets totaling around $ 700 billion. If policies allow its investment in cryptographic assets, even a conservative allowance of 1% of assets would mean that around $ 7 billion flows into the cryptography market. This capital of capital could considerably increase the liquidity and depth of the local cryptography market in South Korea and provide strong institutional approval to the entire industry, which increases the confidence of investors.
Historically, the Korean Won has exceeded the US dollar and the global frequency for cryptocurrency negotiation, becoming the most negotiated fiduciary currency. In addition, the southern Korea crypto boom has not only swept ordinary investors, but has also shown general penetration among civil servants. According to data disclosed by the South Korean government’s ethics committee in March this year, more than 20% of the 2,047 officials questioned interviewed cryptocurrencies, slightly higher than the national average. The 411 officials investing in cryptographic assets collectively hold cryptocurrencies worth 14.4 billion won ($ 9.8 million), with an average investment of almost $ 24,000 per person.
Cryptography reforms during the mandate of Yoon Suk-Yeol: ambitious vision, limited implementation
In 2022, Yoon Suk-Yeol also took office with a “pro-Crypto” image, but failed to implement systematic policies and high-level initiatives during his mandate, which led to reforms that were more discussed than action.
For example, its promise to open the initial policy of the parts supply market (ICO) has never been carried out due to the concerns of regulatory organizations concerning the illegal risks of fundraising and fraud. The tax policy of capital gains on cryptographic assets has also undergone several adjustments and delays during Yoon’s mandate. Although the tax has not been fully canceled and was not fully implemented during its mandate, the inconsistency of the policy has considerably increased the uncertainty of the market. In addition, only the first phase of the “law on the protection of users of virtual assets” was legislated during its mandate, focusing on the protection of investors without actively guiding industry innovation.
In May 2022, Luna Krach caused a global financial shock, South Korea, as the origin of the Terra project, undergoing significant losses. However, the government of President Yoon newly inaugurated has been criticized for its “slow response and systematic lack of coordination” in the early stages of the crisis, quickly not protecting the interests of investors and leading to a loss of confidence in government regulation capacities.
According to statistics from the Korea Blockchain Association, in the second half of 2022, after the incident, the number of active cryptographic portfolios in South Korea has dropped by more than 30% compared to the start of the year. Many retail investors have transferred their assets to bank deposits or to platforms abroad. In addition, in 2023, total financing of startups of the South Korean blockchain decreased by almost 60% in annual shift. Many startup projects have been suspended or moved to markets adapted to regulations “such as Singapore and Dubai, considerably weakening the competitiveness of the South Korea crypto market ecosystem.
New policies on the horizon: Will the South Korea exchange landscape be reshaped?
The political signals of Lee Jae-Myung clearly lean towards a combination of relaxation and regulation, which is undoubtedly a boon for leading exchanges.
Upbit, with more than 70% market share in South Korea, has already cooperated with the government to establish a real account system and actively communicates with regulatory agencies. If the government of Lee implements a “license at several levels” or a “license mechanism”, Upbit should benefit from its resources and technological advantages, consolidating its dominant position more.
Bithumb and Coinone, as second level exchange in the country, can also have the possibility of expanding their market share thanks to the transformation of compliance if new policies strengthen the risk control requirements. However, they must quickly improve their levels of fighting money laundering and technical security to respect policies exams.
For average and small exchanges like Probit and Gopax, if the government applies stricter asset exams and risk reserve requirements, these platforms can deal with technical and funding pressure pressures, which has led to their exit. In addition, if Lee Jae-Myung tightens the cross-border liquidity of cryptographic assets after having taken office, platforms abroad not registered like Binance and Kucoin can be blocked or have their restricted token emission channels, limiting user traffic.
While Singapore tightens the regulations, can South Korea become the new Hotspot of the cryptographic capital?
This week, the Singapore government has made a net turn in its regulatory policy of cryptographic industry. The Singapore monetary authority (Mas) has established a deadline for June 30, demanding that local digital token service providers stop offering digital tokens (DT) to markets abroad and will not provide transitional arrangements for local DTSPs offering services abroad.
This change in policy will force cryptographic companies to reassess their strategic deployments in Asia, focusing on markets with greater flexibility and greater openness of policies.
Although Hong Kong actively attracts the exchanges of cryptography since the redossing of its virtual asset policy in 2023 and allows retail investors to invest in virtual assets, its progress is always limited by multiple financial regulatory approvals, which makes the pace relatively careful. Japan, while having a relatively stable regulation system and a clear compliance framework, also dissuades certain web3 projects due to its high tax rates and slower approval mechanisms.
In this new cycle of competition between Asian crypto centers, if South Korea can quickly implement institutional conceptions and apply them effectively, it should reshape the regional landscape, becoming a solid candidate for the new generation cryptocurrency of Asia.
