Four major changes in the global Crypto Assets market after the South Korean presidential election

Author: Ryan Yoon, Tiger Research

This report, authored by Tiger Research, analyzes how the presidential election in South Korea on June 3 will trigger four major changes in the global cryptocurrency market.

Key Points Summary

• South Korea as a Core Web3 Hub: South Korea has become the world's third-largest cryptocurrency market, behind only the United States and China, with a daily trading volume of $5.4 billion and 9.7 million active users. It serves as a key benchmark for global projects entering Asia.
• Tax acceleration may lead to a decline in trading volume: Although the implementation of cryptocurrency taxes has currently been postponed until 2027, the new government is likely to implement it earlier. Following international precedents, trading volume may decline by over 20%.
• High possibility of ETF approval; other reforms may face delays: All major candidates support the introduction of a Bitcoin spot ETF, increasing the likelihood of its early approval. In contrast, regulatory reforms around the Korean won stablecoin and the "one exchange, one bank" policy are expected to be longer-term agenda items.

1. Is South Korea's presidential election in June only about local issues?

South Korea is scheduled to hold a presidential election on June 3. While this appears to be a local political event, its impact has transcended borders due to the country's influence on the global cryptocurrency market.

*Source: Tiger Research*

South Korea is widely regarded as the third key market for global Web3 projects after the United States and after China. This status is not just the result of a marketing strategy. According to a 2024 report by the Financial Services Commission, South Korea's daily cryptocurrency trading volume reached 7.3 trillion won, with more than 20 million registered accounts and 9.7 million active users.

Investor behavior further solidified this position. South Korean users have consistently shown a strong interest in altcoins beyond Bitcoin and Ethereum. On-chain activity is also very active, making South Korea a valuable indicator for assessing the acceptance of new projects in the global market.

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

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

2. What changes will occur after the South Korean presidential election?

*Source: Tiger Research*

2.1. The End of Cryptocurrency Tax Deferral Policy

According to the roadmap from the Financial Services Commission regarding corporate participation in the cryptocurrency market, corporate entities are gradually being granted access to the cryptocurrency market. This gradual opening of the market inevitably requires corresponding comprehensive reforms to 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 annual earnings exceeding approximately $1,850 starting from January 2025. However, the implementation has been delayed by two years.

An increasingly contentious point is that while individuals and companies currently generate income from cryptocurrency trading, they all benefit from tax deferral policies. According to the roadmap of the Financial Services Commission, starting in the second half of 2025, listed companies and registered professional investment firms will be allowed to invest in virtual assets through corporate accounts.

In light of this shift, it is unlikely that the deferral policies for individuals and companies will be extended again. The government may seek legislative amendments to abolish the current deferral policies and implement taxation earlier.

On the issue of tax deferrals, there has historically been a divergence in political positions among various parties. The Democratic Party initially advocated for raising the tax exemption threshold rather than delaying taxation, although it ultimately supported the deferral policy. Depending on the election results, the policy may shift towards increasing deduction limits instead of maintaining the deferral policy.

If taxation is implemented, the trading volume of domestic exchanges is likely to see a significant decline—consistent with international precedents. In 2022, India imposed a 30% tax on cryptocurrency gains and introduced a 1% withholding tax on all transactions. This led to a decline in trading volume of major platforms such as WazirX and CoinDCX by 10% to 70%. Similarly, after the introduction of high tax rates in 2023, Indonesia's trading volume fell by approximately 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.

2.2. Introduction of Cryptocurrency ETFs

*Source: Tiger Research*

• Lee Jae-myung (Democratic Party): On May 6, Lee Jae-myung announced his support for spot cryptocurrency ETFs through Facebook, as part of his broader initiative to support youth asset formation. He also proposed lowering investment fees to improve accessibility.
• Kim Woosung (People Power Party): On April 27, he expressed an open attitude towards allowing public institutions to invest in the cryptocurrency market. His ten core policy commitments include introducing a spot cryptocurrency ETF under the banner of "expanding the wealth of the middle class."
• Lee Joon-sik (Reform Party): On May 20, Lee Joon-sik proposed through his YouTube channel that the government should hold Bitcoin as a national strategic reserve using tools such as ETFs.

The introduction of a spot cryptocurrency ETF is the only policy proposal to achieve 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 take place seriously shortly after the election.

If spot ETFs are introduced, they will naturally compete on fees with existing exchanges that facilitate Bitcoin spot trading. 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 increase accessibility.

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

2.3. Re-examining the 'One Exchange One Bank' Model

To manage anti-money laundering (AML) risks in the cryptocurrency sector, South Korea has maintained an implicit "one exchange, one bank" principle. Under this model, each licensed cryptocurrency exchange is only allowed to partner with one commercial bank to issue real-name verified deposit accounts. For example, Upbit only collaborates with K-Bank, while Bithumb is linked to KB Kookmin Bank.

This framework contrasts with jurisdictions like the United States, where platforms like Coinbase offer integration with various financial services, including Apple Pay, Google Pay, and various banking institutions.

At a policy discussion meeting of the People Power Party, the president of Woori Bank, Jeong Jin-wan, raised the issue, leading to a heated debate about abolishing the "one exchange, one bank" principle. He believes that the current structure poses systemic risks, limits consumer choices, and imposes unnecessary restrictions on corporate clients. Jeong called for a shift to a "one exchange, multiple banks" model.

As the presidential campaign unfolds, various political parties are beginning to state their positions. On April 28, the People Power Party included the abolition of the "one exchange, one bank" rule in its "seven major digital asset commitments." The Democratic Party also seems to be reviewing this matter internally. However, a cautious attitude has emerged within the Democratic Party since then, and it is currently unclear whether this issue will be reflected in formal campaign commitments. Financial regulatory agencies are also maintaining a cautious stance, indicating that any changes may require long-term deliberation.

While regulatory prudence is necessary, maintaining the current model due to concerns about market concentration and anti-money laundering risks may need to be reconsidered. The view that this rule can prevent market monopolies is becoming increasingly unconvincing, as Upbit and Bithumb already control about 97% of the domestic market. Allowing multiple banks to collaborate can enhance competition by enabling exchanges to serve a broader user base. This could lead to lower fees and more innovative services for retail and institutional users.

Concerns about anti-money laundering risks also require more detailed assessment. In fact, greater risks occur during the process of transferring to overseas exchanges. Since the implementation of the Travel Rule and improvements in compliance infrastructure, South Korea now operates under stricter international monitoring standards. In this context, the systemic risks brought about by allowing multiple banking relationships seem to be exaggerated.

2.4. 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 "Project Han-Gang" to test a CBDC-based payment and settlement system. However, as the global trend shifts towards stablecoins, the domestic demand for the Korean won stablecoin is increasing.

*Source: 21st Presidential Debate: First Presidential Debate*

• Lee Jae-myung (Democratic Party):

• May 8: In an economic YouTube interview, it was stated that a stablecoin based on the Korean won could prevent capital outflow by creating domestic alternatives.
• May 18: Emphasized in the television debate that the Korean Won stablecoin will be supported by collateral reserves to ensure stability.

• Lee Jun-seok (Reform Party):

• May 18: Questioning the feasibility of Lee Jae-myung's proposal, citing the lack of clarity in anti-money laundering measures in stablecoin issuance.

• Jin Wuxing (National Power Party):

• April 28: The regulatory framework for stablecoins is included in its 'Seven Major Digital Asset Commitments'.

The first presidential debate on May 18 brought stablecoins into the mainstream political discourse through the exchanges between Lee Jae-myung and Lee Jun-seok. While the discussion showed directional support, it also highlighted the lack of a detailed policy framework, especially regarding risk mitigation and compliance.

At this stage, the proposal for a Korean won stablecoin remains visionary rather than operational. The likelihood of immediate implementation after the election is low. However, given 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 identifying qualified issuers, ensuring collateral transparency, establishing anti-money laundering protocols, and defining the relationship between stablecoin and CBDC initiatives. Given the complexity of these issues, policy development is expected to proceed in a phased, medium- to long-term manner, rather than quickly changing after elections.

3. Gradual but Inevitable: Upcoming Changes

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

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

As mentioned earlier, the final implementation of cryptocurrency taxation is inevitable. In addition, legislative discussions surrounding Security Token Offerings (STO) are expected to resume. Investors and market participants should not underestimate these changes. Stakeholders must begin to prepare for a policy environment that will become increasingly regulated and compliant.