Original Article Title: "Four Key Changes in the Global Cryptocurrency Market After the South Korean Presidential Election"

Original Article Author: Ryan Yoon, Tiger Research

Editor's Note: According to a late-night report by South Korea's JTBC TV station on the 3rd, Democratic Party candidate Lee Jae-myung was elected President of South Korea. (Xinhua News Agency) Earlier reports stated that Lee Jae-myung had promised to promote the approval of a cryptocurrency spot ETF and proposed the issuance of a Korean won-based stablecoin.

This report, written by Tiger Research, analyzes how the South Korean presidential election on June 3rd will trigger four key 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 has become the world's third-largest cryptocurrency market after the United States and China. It serves as a key gateway for global projects entering Asia.

· Tax Acceleration Could Lead to Volume Decline: Although the implementation of cryptocurrency taxes is currently delayed until 2027, the new government is likely to accelerate it. Drawing from international examples, trading volumes could drop by more than 20%.

· High Likelihood 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 surrounding a Korean won stablecoin and the "one exchange, one bank" policy are expected to be longer-term agenda items.

1. Is South Korea's June Presidential Election Solely Local?

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

Source: Tiger Research

South Korea is widely regarded as the third key market for global Web3 projects after the United States and China. This status is not merely the result of marketing strategies. According to a 2024 report by the Financial Services Commission, South Korea's daily cryptocurrency trading volume reached 73 trillion Korean won, with over 20 million registered accounts and 9.7 million active users.

The behavior of investors has further solidified this position. South Korean users have always shown a strong interest in altcoins other than Bitcoin and Ethereum. On-chain activity is also very active, making South Korea a valuable indicator of global market acceptance for new projects.

For many global projects, establishing a presence in South Korea has become a strategic entry point to the broader Asian market. This gives the upcoming election special significance, as key election topics now include cryptocurrency taxation, regulation of a Korean won stablecoin, and approval of a cryptocurrency ETF.

These developments are not limited to domestic stakeholders. Global investors and project operators must also pay attention to the election results. The possibility of both regulatory tightening and regulatory relaxation exists, and projects with a large South 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?

Source: Tiger Research

2.1. End of Cryptocurrency Tax Delay Policy

According to the Financial Services Commission's roadmap for corporate participation in the cryptocurrency asset market, corporate entities are gradually being granted permission to enter the cryptocurrency market. This gradual opening of the market inevitably requires a comprehensive reform of the tax framework. Currently, South Korea's virtual asset taxation has been postponed until 2027. The original plan was to impose a 20% tax on the part of annual income exceeding approximately $1,850 from January 2025. However, this implementation has been delayed by two years.

An increasingly contentious issue is that although both individuals and companies currently generate income from cryptocurrency transactions, they both benefit from the tax delay policy. According to the roadmap of the Financial Services Commission, starting from the second half of 2025, listed companies and registered professional investment firms will be allowed to invest in virtual assets through corporate accounts.

Given this shift, it is unlikely that the delay policy for individuals and companies will be extended again. The government may seek legislative amendments to abolish the current delay policy and implement taxation early. There has always been a political divide on the tax delay issue among the various parties. The Democratic Party initially advocated raising the tax-free threshold instead of delaying taxation, although it ultimately supported the delay policy. Depending on the election results, the policy may shift towards increasing deduction limits rather than maintaining the delay policy.

If taxation is implemented, the trading volume on domestic exchanges is likely to experience a significant decline — consistent with international precedents. In 2022, India imposed a 30% tax on cryptocurrency gains and introduced a 1% TDS (Tax Deducted at Source) on all transactions. This led to a 10% to 70% drop in trading volume on major platforms like WazirX and CoinDCX. Similarly, after the introduction of high tax rates in 2023, Indonesia saw a year-on-year decrease in trading volume of around 60%. Although the proposed tax rates in Korea are not as aggressive, these examples indicate that the trading volume on local platforms may decline by over 20%, with funds possibly shifting to offshore platforms.

2.2. Introduction of Cryptocurrency ETF

Source: Tiger Research

· Lee Jae Myung (Democratic Party): On May 6, Lee Jae Myung announced via Facebook his support for a spot cryptocurrency ETF as part of his broader initiative to support youth asset formation. He also proposed reducing investment costs to enhance accessibility.

· Kim Moo Sung (People Power Party): On April 27, he expressed an open attitude towards allowing public institutions to invest in the cryptocurrency market. His ten key policy commitments include introducing a spot cryptocurrency ETF under the banner of "expanding middle-class wealth."

· Lee Jun-sik (Reform Party): On May 20, Lee Jun-sik proposed via his YouTube channel that the government should hold Bitcoin as a national strategic reserve through tools like ETFs.

The introduction of a spot cryptocurrency ETF is the only policy proposal on which leading candidates from different parties have reached a bipartisan consensus, making it one of the most likely achievements to be realized in the short term. Policy discussions are expected to intensify shortly after the election. If spot ETFs are introduced, they would naturally compete with existing platforms that facilitate Bitcoin spot trading. This would promote healthier market dynamics and improve overall service quality. For investors, especially those with smaller portfolio sizes, lower fees could reduce entry barriers and increase accessibility.

In the long run, the launch of spot ETFs could act as a catalyst for further financial innovation. It could pave the way for integrating cryptocurrency into new products in the traditional finance sector, such as derivatives, index funds, and other hybrid investment instruments.

2.3. Revisiting the "One Exchange, One Bank" Model

To manage anti-money laundering (AML) risks in the cryptocurrency space, South Korea has long upheld 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 with KB Kookmin Bank. This framework contrasts with jurisdictions like the United States, where platforms like Coinbase offer integrations with various financial services, including Apple Pay, Google Pay, and multiple banking institutions.

During a policy discussion at the Liberty Korea Party, President of Woori Bank, Jeong Jin-wan, raised this issue, sparking a growing debate about abolishing the "one exchange, one bank" principle. He believes that the current structure poses systemic risks, limits consumer choice, and imposes unnecessary restrictions on corporate customers. Jeong called for a shift towards a "one exchange, multiple banks" model.

As the presidential election campaign unfolds, political parties are beginning to voice their stances. On April 28, the Liberty Korea Party included the repeal of the "one exchange, one bank" rule in its "Seven Major Digital Asset Commitments." The Democratic Party also seems to be internally reviewing the matter. However, caution has since arisen within the Democratic Party, and it is currently unclear whether this issue will be reflected in formal campaign pledges. Financial regulatory agencies are similarly adopting a cautious approach, indicating that any changes may require extensive deliberation.

While regulatory prudence is necessary, maintaining the current model based on concerns about market concentration and AML risks may warrant reassessment. The argument that this rule prevents market monopolies is becoming less convincing, as Upbit and Bithumb already control approximately 97% of the domestic market. Allowing multiple bank partnerships can enhance competition by enabling exchanges to serve a broader user base. This could bring lower costs and more innovative services to retail and institutional users.

Concerns regarding AML risks also need a more nuanced evaluation. In fact, greater risks occur in the outbound transfer process to overseas exchanges. With the implementation of the Travel Rule and improvements in compliance infrastructure, South Korea is now operating under stricter international monitoring standards. Against this backdrop, the systemic risks posed by allowing multiple bank relationships appear to be overstated.

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

Source: 21st Presidential Debate: First Presidential Debate

Lee Jae Myung (Democratic Party):

· May 8: Stated in an economic YouTube interview that a Korean won-based stablecoin could prevent capital outflow by creating a domestic alternative.

· May 18: Emphasized in a televised debate that the Korean won stablecoin would be backed by collateral reserves to ensure stability.

Lee Jun-sik (Reform Party):

· May 18: Questioned the feasibility of Lee Jae Myung's proposal, citing a lack of clarity on anti-money laundering measures in stablecoin issuance.

Kim Moo Sung (National Power Party):

· April 28: Included a regulatory framework for stablecoins in his "Seven Major Digital Asset Commitments."

· The first presidential debate on May 18 introduced stablecoins into mainstream political discourse through the clash between Lee Jae Myung and Lee Jun-sik. While the discussion showed directional support, it also highlighted the lack of a detailed policy framework—especially in terms of risk mitigation and compliance.

At this stage, proposals regarding a Korean won stablecoin remain visionary rather than actionable. The likelihood of immediate post-election implementation 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 catch up to maintain its competitiveness as a financial center.

Any meaningful progress will require 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 stablecoins 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 swift changes post-election.

3. Gradual but Inevitable: The Coming Changes

While the discussed policy shifts are significant for the industry, they are unlikely to materialize in the short term. Among the major presidential candidates, only Kim Moo Sung has included Web3-related measures in his top ten campaign commitments. This indicates that, while relevant to the industry, Web3 issues have not been prioritized in the current broader policy agenda. Therefore, regulatory changes are expected to advance gradually, with discussions possibly running parallel to more urgent policy matters. However, the trajectory is clear: transformation is inevitable.

As mentioned earlier, the ultimate implementation of cryptocurrency taxation is inevitable. Furthermore, legislative discussions surrounding Security Token Offerings (STOs) are expected to resume. For investors and market participants, these shifts should not be underestimated. Stakeholders must begin preparing for a policy environment that will increasingly emphasize standardization and compliance.

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