Four Major Impacts of the South Korean Presidential Election on the Global Crypto Assets Market

South Korea is scheduled to hold a presidential election on June 3rd. Although this appears to be a local political event, its impact will transcend borders due to the country's significance to the global Crypto Assets market.

South Korea is widely regarded as the third largest key market for global Web3 projects after the United States and China. According to a report from the Financial Services Commission in 2024, South Korea's daily Crypto Assets trading volume reached 7.3 trillion won, with over 20 million registered accounts and 9.7 million active users.

Korean users have always shown a strong interest in altcoins beyond Bitcoin and Ethereum. On-chain activity is also very active, making Korea a valuable indicator of the global market acceptance of new projects.

For many global projects, establishing a business in South Korea has become a strategic entry point into the broader Asian market. This makes the upcoming elections particularly significant, as key campaign issues now include Crypto Assets taxation, the regulation of the Korean won stablecoin, and the approval of Crypto Assets ETFs.

These developments are not limited to domestic stakeholders. Global investors and project operators must also pay attention to election results. There is the possibility of both regulatory tightening and loosening, and projects with a large user base in Korea may be particularly sensitive to the policy direction set by the next government.

What changes will occur after the South Korean presidential election?

1. The end of the Crypto Assets tax deferral policy

According to the Financial Services Commission's roadmap for corporate participation in the Crypto Assets market, corporate entities are gradually being granted access to the cryptocurrency market. This gradual opening of the market inevitably requires a corresponding comprehensive reform of the tax framework.

Currently, the taxation of virtual assets in South Korea has been postponed until 2027. The original plan was to impose a 20% tax on the portion of annual earnings exceeding approximately $1,850 starting from January 2025. However, the implementation has been delayed by two years.

Given this shift, the extension policy for individuals and companies is unlikely to be extended again. The government may seek legislative amendments to abolish the current extension policy and implement taxation earlier.

If taxation is implemented, the trading volume of domestic exchanges is likely to see a significant decline------this is consistent with international precedents. In 2022, India imposed a 30% tax on crypto assets gains and introduced a 1% withholding tax on all transactions. This led to a 10% to 70% decrease in trading volume on major platforms. Similarly, after the introduction of high tax rates in 2023, Indonesia's trading volume fell by about 60% year-on-year.

Although the tax rate proposed by South Korea is not as aggressive, these examples indicate that the trading volume of local exchanges may decline by more than 20%, while funds may shift to offshore platforms.

2. The Introduction of Crypto Assets ETF

The introduction of spot Crypto Assets ETFs is the only policy proposal that has achieved bipartisan consensus among leading candidates, making it one of the most likely outcomes to be realized in the short term. Policy discussions are expected to begin in earnest shortly after the election concludes.

If spot ETFs are introduced, they will naturally compete with existing exchanges that facilitate Bitcoin spot trading in terms of fees. This will promote healthier market dynamics and improve overall service quality. For investors, especially those with smaller portfolio sizes, lower fees can reduce the barrier to entry and enhance accessibility.

In the long run, the launch of spot ETFs could become a catalyst for further financial innovation. It may pave the way for new products that integrate Crypto Assets with traditional finance, such as derivatives, index funds, and other hybrid investment tools.

3. Re-examining the "one exchange one bank" model

To manage Anti-Money Laundering (AML) risks in the crypto assets field, South Korea has maintained an implicit "one exchange, one bank" principle. Under this model, each licensed crypto asset exchange is only allowed to cooperate with one commercial bank to issue real-name verified deposit accounts.

As the presidential campaign unfolds, various political parties are beginning to state their positions. One party has included the repeal of the "one exchange one bank" rule in its "seven major commitments to digital assets." Another party also seems to be internally reviewing this matter. However, a cautious attitude has emerged within that party, and it is currently unclear whether this issue will be reflected in formal campaign commitments. Financial regulatory authorities are also maintaining a cautious stance, indicating that any changes may require long-term deliberation.

Allowing multiple banks to collaborate can enhance competition by enabling exchanges to serve a broader user base. This may result in lower fees and more innovative services for retail and institutional users.

4. Korean Won Stablecoin

Historically, South Korea has prioritized the development of Central Bank Digital Currency (CBDC) over stablecoins. The Bank of Korea is currently conducting a pilot program called the "Han River Project" to test a CBDC-based payment and settlement system. However, as global trends shift towards stablecoins, domestic demand for the Korean Won stablecoin is growing.

At this stage, the proposal for a Korean won stablecoin is still visionary rather than operational. The likelihood of immediate implementation after the election is low. However, considering regional trends—especially in Singapore and Hong Kong, where authorities are actively developing stablecoins pegged to local currencies—South Korea may face increasing pressure to follow suit in order to maintain its competitiveness as a financial center.

Any meaningful progress requires a foundational legal and regulatory framework. Key issues include determining qualified issuers, ensuring collateral transparency, establishing anti-money laundering protocols, and defining the relationship between stablecoins and CBDC programs. Given the complexity of these issues, policy development is expected to proceed in a phased medium to long-term manner, rather than changing rapidly after elections.

Gradual but Inevitable: The Coming Changes

Although the discussed policy changes are significant for the industry, they are unlikely to be realized in the short term. Among the major presidential candidates, only one has included Web3-related measures in their top ten campaign promises. This indicates that, despite being relevant to the industry, Web3 issues are not currently prioritized in the broader policy agenda.

Therefore, regulatory reforms are expected to be gradually advanced, and discussions may proceed in parallel with more urgent policy matters. However, the trajectory is clear: transformation is inevitable.

The final implementation of cryptocurrency taxation is inevitable. Moreover, legislative discussions around Security Token Offerings (STOs) are expected to resume. Investors and market participants should not underestimate these changes. Stakeholders must begin to prepare for a policy environment that will increasingly become regulated and compliant.