On Wednesday (June 4), Lee Jae-myung, the leader of South Korea's Democratic Party, defeated the incumbent conservative party leader Kim Moon-soo to become the new president of South Korea. This crypto-friendly new president proposed several policies to support the crypto industry during his campaign to gain the support of approximately 15 million crypto investors nationwide.
Three Strategic Directions Outline the Future Blueprint for South Korea's Crypto Landscape
Lee Jae-myung views virtual assets as a core element in driving national financial innovation and has incorporated them into presidential-level policy commitments for the first time. His core objective is to restructure the compliance and security framework of the crypto market through high-level institutional planning. His main commitments to the crypto industry during the campaign include:
Lee Jae-myung explicitly stated that he would actively promote the legalization of spot cryptocurrency ETFs, providing investors with more diverse and compliant investment tools. Spot ETFs differ from futures ETFs as they more directly reflect the spot price of cryptocurrencies, helping to expand market participation, enhance investment convenience, and improve market transparency.
He promised to relax relevant restrictions on institutional investors, particularly allowing large public funds such as national pension funds to invest in certain cryptocurrencies and their derivatives. This move is expected to attract more long-term capital, enhance market liquidity and stability, and promote the scaled development of the crypto industry.
Lee Jae-myung pointed out in a policy discussion with YouTube creators that South Korea should vigorously support the development of a stablecoin market based on the Korean won to "prevent national wealth from flowing overseas." He emphasized that promoting won-based stablecoins not only helps maintain national financial sovereignty but also injects vitality into South Korea's digital economy and enhances the competitiveness of local digital assets.
It is noteworthy that the National Pension Fund of South Korea, as one of the largest public pension funds globally, has an asset management scale of approximately $700 billion. If policies allow it to invest in crypto assets, even with a conservative asset allocation ratio of 1%, it would mean about $7 billion flowing into the crypto market. This scale of funding could significantly enhance the liquidity and depth of the local crypto market in South Korea and provide strong institutional backing for the entire industry, boosting investor confidence.
From past data, the Korean won has surpassed the US dollar and euro in usage frequency in global cryptocurrency trading, becoming the fiat currency with the largest trading volume. Moreover, the crypto craze in South Korea has not only swept ordinary investors but has also shown widespread penetration among public officials. According to data disclosed by the Korean government's ethics committee in March this year, over 20% of the 2,047 public officials surveyed held cryptocurrencies, slightly above the national average. The 411 officials investing in crypto assets collectively held cryptocurrencies worth 14.4 billion won (approximately $9.8 million), with an average investment amount of nearly $24,000.
Crypto Reform During Yoon Suk-yeol's Administration: Ambitious Vision, Harsh Reality
Yoon Suk-yeol also came to power in 2022 with a "crypto-friendly" image, but during his actual administration, the lack of systematic policy design and high-level promotion led to reforms being characterized by "a lot of noise but little action."
For instance, the promised policy to open the initial coin offering (ICO) market was never implemented due to regulatory concerns over illegal financing and fraud risks. The policy regarding capital gains tax on crypto assets also underwent multiple adjustments and delays during Yoon's term. Although the tax was not completely abolished, and its full implementation was not formally realized during his tenure, the policy's fluctuations greatly increased market uncertainty. Additionally, Yoon's administration only pushed for the first phase of the "Virtual Asset User Protection Act," which focused on investor protection and lacked proactive guidance for industry innovation.
In May 2022, the LUNA crash triggered financial shocks globally, with South Korea, as the birthplace of the Terra project, being particularly hard hit. However, the newly inaugurated Yoon Suk-yeol government faced criticism for its "slow response and lack of systematic coordination" during the initial crisis, failing to protect investor interests in a timely manner and causing the market to lose confidence in the government's regulatory capabilities.
According to statistics from the Korea Blockchain Association, the number of active crypto wallets in South Korea fell by over 30% in the second half of 2022 compared to the beginning of the year. Many retail investors transferred their assets to bank deposits or overseas platforms. Furthermore, the total financing amount for local blockchain startups in South Korea sharply decreased by nearly 60% year-on-year in 2023. Many startup projects faced stagnation or relocated to "regulatory-friendly" markets like Singapore and Dubai, significantly weakening the ecological competitiveness of South Korea's crypto market.
With New Policies Coming, Will South Korean Exchanges Be Reshuffled?
Lee Jae-myung's policy signals clearly lean towards a combination of relaxation and regulation, which is undoubtedly a boon for leading exchanges.
Upbit, as the leading exchange with over 70% market share in South Korea, has already cooperated with the government to establish a real-name account system and actively communicated with regulatory agencies. If the Lee Jae-myung government implements a "tiered licensing" or "licensing mechanism," Upbit is expected to benefit from its resource and technological advantages, further consolidating its monopoly position.
Bithumb and Coinone, as the second-tier exchanges, may also have the opportunity to expand their market share again through compliance transformation if the new policies strengthen risk control requirements. However, they need to quickly enhance their anti-money laundering and technical security levels to meet policy scrutiny.
For smaller exchanges like Probit and GOPAX, if the government pushes for stricter asset review and risk reserve requirements, these platforms may face pressure from technical and financial thresholds, potentially leading to their exit from the market. Additionally, if Lee Jae-myung tightens cross-border crypto asset liquidity after taking office, unregistered overseas platforms like Binance and KuCoin may be blocked or have their token issuance channels restricted, limiting user traffic.
As Singapore Tightens Regulatory Policies, Can South Korea Become a New Hotspot for Crypto Capital?
This week, the Singapore government made a sharp turn in its regulatory policies for the crypto industry. The Monetary Authority of Singapore (MAS) has set a deadline of June 30, requiring local digital token service providers to stop offering digital token (DT) services to overseas markets and will not provide transitional arrangements for local DTSPs offering services abroad.
This policy shift will force crypto companies to reassess their strategic deployments in Asia and shift their focus to markets with more flexibility and policy openness.
Although Hong Kong has been actively attracting crypto exchanges since it restarted its virtual asset policies in 2023 and allows retail investors to invest in virtual assets compliantly, its progress is still limited by multiple levels of financial regulatory approvals, making the pace relatively cautious. Japan, while having a relatively stable regulatory system and clear compliance framework, also deters some Web3 projects due to its high tax rates and slow approval mechanisms.
In this new round of competition for the Asian crypto center, if South Korea can quickly implement institutional designs and effectively execute them, it is expected to reshape the regional landscape and become a strong candidate for the new generation of crypto hubs in Asia, taking advantage of Singapore's tightening and the slowdown in Hong Kong and Japan.
Related: Lee Jae-myung, the pro-crypto candidate, elected as president of South Korea
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