On Wednesday, June 4, Lee Jae-myung, leader of South Korea's Democratic Party, defeated incumbent conservative leader Kim Moon-soo to become the country's new president. This crypto-friendly leader had proposed several policies during his campaign to support the cryptocurrency industry, aiming to garner the support of approximately 15 million crypto investors nationwide.
Three Strategic Directions Outline South Korea's Crypto Future
Lee Jae-myung views virtual assets as a core element in driving national financial innovation and has, for the first time, included them in presidential-level policy commitments. His main campaign promises regarding the crypto industry include:
- Promoting Legalization of Spot Cryptocurrency ETFs: Lee has expressed his intention to actively promote the legalization of spot cryptocurrency ETFs, providing investors with more diverse and compliant investment tools. Unlike futures ETFs, spot ETFs directly reflect the spot price of cryptocurrencies, helping to expand market participation, enhance investment convenience, and improve market transparency.
- Allowing Institutional Investors to Enter the Crypto Asset Market Legally: He has pledged to relax restrictions on institutional investors, especially large public funds like the national pension fund, allowing them to invest in certain cryptocurrencies and their derivatives. This move is expected to introduce more long-term capital, enhance market liquidity and stability, and promote the scaled development of the crypto industry.
- Supporting the Development of the Korean Won Stablecoin Market: In a policy discussion with YouTube creators, Lee pointed out 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 the Korean won stablecoin not only helps maintain national financial sovereignty but also injects vitality into South Korea's digital economy, enhancing the competitiveness of local digital assets.
Notably, South Korea's national pension fund, one of the world's largest public pension funds, manages assets totaling approximately $700 billion. If policies permit its investment in crypto assets, even a conservative 1% asset allocation would mean about $7 billion flowing into the crypto market. This capital scale could significantly boost the liquidity and depth of South Korea's local crypto market and provide strong institutional endorsement for the entire industry, increasing investor confidence.
Historically, the Korean won has surpassed the US dollar and euro in global cryptocurrency trading frequency, becoming the most traded fiat currency. Moreover, South Korea's crypto boom has not only swept ordinary investors but has also shown widespread penetration among public officials. According to data disclosed by the South Korean government's Ethics Committee in March this year, over 20% of the 2,047 public officials surveyed hold cryptocurrencies, slightly higher than the national average. The 411 officials investing in crypto assets collectively hold cryptocurrencies worth 14.4 billion won ($9.8 million), with an average investment of nearly $24,000 per person.
Crypto Reforms During Yoon Suk-yeol's Tenure: Ambitious Vision, Limited Implementation
In 2022, Yoon Suk-yeol also assumed office with a "pro-crypto" image but failed to implement systematic policy designs and high-level initiatives during his tenure, leading to reforms that were more talk than action.
For instance, his promise to open the initial coin offering (ICO) market policy was never realized due to regulatory agencies' concerns about illegal fundraising and fraud risks. The capital gains tax policy on crypto assets also underwent multiple adjustments and delays during Yoon's tenure. Although the tax was not entirely canceled and was not fully implemented during his term, the policy's inconsistency greatly increased market uncertainty. Additionally, only the first phase of the "Virtual Asset User Protection Act" was legislated during his tenure, focusing on investor protection without actively guiding industry innovation.
In May 2022, the LUNA crash caused a global financial shock, with South Korea, as the origin of the Terra project, suffering significant losses. However, the newly inaugurated President Yoon's government was criticized for its "slow response and lack of systematic coordination" in the early stages of the crisis, failing to protect investors' interests promptly and leading to a loss of confidence in the government's regulatory capabilities.
According to statistics from the Korea Blockchain Association, in the second half of 2022, after the incident, the number of active crypto wallets in South Korea dropped by over 30% compared to the beginning of the year. Many retail investors transferred their assets to bank deposits or overseas platforms. Moreover, in 2023, the total financing of South Korean blockchain startups decreased by nearly 60% year-on-year. Many startup projects were suspended or moved to "regulation-friendly" markets like Singapore and Dubai, significantly weakening the competitiveness of South Korea's crypto market ecosystem.
New Policies on the Horizon: Will South Korea's Exchange Landscape Be Reshaped?
Lee Jae-myung's policy signals clearly lean towards a combination of relaxation and regulation, which is undoubtedly a boon for leading exchanges.
Upbit, with over 70% market share in South Korea, has already cooperated with the government to establish a real-name account system and actively communicates with regulatory agencies. If Lee's government implements a "tiered licensing" or "licensing mechanism," Upbit is expected to benefit from its resources and technological advantages, further consolidating its dominant position.
Bithumb and Coinone, as second-tier exchanges in the country, may also have the opportunity to expand their market share through compliance transformation if new policies strengthen risk control requirements. However, they need to quickly enhance their anti-money laundering and technical security levels to meet policy reviews.
For medium and small exchanges like Probit and GOPAX, if the government enforces stricter asset reviews and risk reserve requirements, these platforms may face technical and funding threshold pressures, potentially leading to their exit. 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 Regulations, Can South Korea Become the New Hotspot for Crypto Capital?
This week, the Singapore government made a sharp turn in its crypto industry regulatory policy. The Monetary Authority of Singapore (MAS) has set a deadline of June 30, requiring local digital token service providers to cease offering digital token (DT) services to overseas markets and will not provide transitional arrangements for local DTSPs offering services overseas.
This policy change will force crypto companies to reassess their strategic deployments in Asia, shifting their focus to markets with greater flexibility and policy openness.
Although Hong Kong has been actively attracting crypto exchanges since restarting its virtual asset policy in 2023 and allowing retail investors to invest in virtual assets compliantly, its progress is still limited by multiple 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 slower approval mechanisms.
In this new round of competition among Asian crypto centers, if South Korea can quickly implement institutional designs and effectively enforce them, it is expected to reshape the regional landscape, becoming a strong candidate for Asia's next-generation crypto hub.