This report, written by Tiger Research, analyzes how the South Korean presidential election on June 3rd will trigger four major changes in the global cryptocurrency market.
Key Points Summary
· South Korea as a Core Web3 Hub: With a daily trading volume of $5.4 billion and 9.7 million active users, South Korea is the world's third-largest cryptocurrency market, following the United States and China. It serves as a key benchmark for global projects entering Asia.
· Tax Implementation May Accelerate Trading Volume Decline: Although cryptocurrency tax implementation is currently postponed until 2027, the new government is likely to implement it earlier. Following international precedents, trading volume could drop by over 20%.
· High Likelihood of ETF Approval; Other Reforms May Face Delays: All major candidates support introducing a Bitcoin spot ETF, increasing the possibility of early approval. In contrast, regulatory reforms for the Korean won stablecoin and the "one trading platform, one bank" policy are expected to be longer-term agenda items.
1. Is the June Presidential Election in South Korea Only a Local Matter?
South Korea will hold a presidential election on June 3rd. While this may seem like a local political event, its impact has transcended national boundaries due to the country's influence on the global cryptocurrency market.
South Korea is widely considered the third key market for global Web3 projects after the United States and China. This status is not merely a result of marketing strategy. According to the Financial Services Commission's 2024 report, South Korea's daily cryptocurrency trading volume reaches 7.3 trillion won, with over 20 million registered accounts and 9.7 million active users.
Investor behavior further solidifies this position. South Korean users have consistently shown strong interest in Altcoins beyond Bitcoin and Ethereum. The on-chain activity is also highly active, making South Korea a valuable indicator of new projects' global market acceptance.
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 election particularly significant, as key campaign issues now include cryptocurrency taxation, Korean won stablecoin regulation, and cryptocurrency ETF approval.
These developments are not limited to domestic stakeholders. Global investors and project operators must also pay attention to the election results. Both regulatory tightening and relaxation are possible, and projects with a large Korean user base may be particularly sensitive to the policy direction set by the next government.
2. What Changes Will Occur After the South Korean Presidential Election?
Although regulatory caution is necessary, maintaining the current model based on concerns about market concentration and anti-money laundering risks may need to be reconsidered. The view that this rule can prevent market monopoly is becoming less convincing, as Upbit and Bithumb already control about 97% of the domestic market. Allowing multiple banks to cooperate can enhance competition by enabling trading platforms to serve a broader user base. This could bring lower fees and more innovative services for retail and institutional users.
Concerns about anti-money laundering risks also need more nuanced assessment. In fact, greater risks occur during transfers to overseas trading platforms. Since the implementation of the Travel Rule and improvement of compliance infrastructure, South Korea now operates under stricter international monitoring standards. In this context, the systemic risks brought by allowing multiple bank relationships seem exaggerated.
2.4. Korean Won Stablecoin
Historically, South Korea has prioritized central bank digital currency (CBDC) development 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, with the global trend shifting towards stablecoins, domestic demand for Korean won stablecoins is growing.
Lee Jae-myung (Democratic Party):
· May 8: In an economic YouTube interview, stated that a won-based stablecoin could prevent capital outflow by creating domestic alternatives.
· May 18: Emphasized in a TV debate that the Korean won stablecoin would be backed by collateral reserves to ensure stability.
Lee Joon-seok (Reform Party):
· May 18: Questioned the feasibility of Lee Jae-myung's proposal, citing a lack of clarity in anti-money laundering measures for stablecoin issuance.
Kim Woo-sung (National Power Party):
· April 28: Included a regulatory framework for stablecoins in his "seven digital asset promises".
· The first presidential debate on May 18, through the exchange between Lee Jae-myung and Lee Joon-seok, brought stablecoins into mainstream political discourse. While the discussion showed directional support, it also highlighted the lack of a detailed policy framework—especially in risk mitigation and compliance.
At this stage, proposals for a Korean won stablecoin remain visionary rather than operational. Immediate implementation after the election is unlikely. 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 to maintain its competitiveness as a financial center.
Any meaningful progress requires a fundamental legal and regulatory framework. Key issues include identifying qualified issuers, ensuring collateral transparency, establishing anti-money laundering protocols, and defining the relationship between stablecoins and CBDC plans. Given the complexity of these issues, policy development is expected to advance in a phased, medium to long-term approach, rather than rapidly changing after the election.
3. Gradual but Inevitable: Upcoming 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 Kim Woo-sung included Web3-related measures in his top ten campaign promises. This indicates that Web3 issues are not prioritized in the current broader policy agenda. Therefore, regulatory changes are expected to progress gradually, with discussions potentially running parallel to more urgent policy matters. However, the trajectory is clear: transformation is inevitable.
As previously mentioned, the final implementation of cryptocurrency taxation is inevitable. Moreover, legislative discussions around security token offerings (STO) are expected to resume. Stakeholders should not underestimate these transformations. Stakeholders must begin preparing for an increasingly regulated and compliant policy environment.
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