Four Major Changes in the Global Cryptocurrency Market After the South Korean Presidential Election

Author: Ryan Yoon, Tiger Research

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

Key Takeaways

• 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 third-largest cryptocurrency market globally, following the United States and China. It serves as a key benchmark for global projects entering Asia.

• Tax Acceleration May Lead to Declining Trading Volume: Although the implementation of cryptocurrency taxes has currently been postponed until 2027, the new government is likely to push for earlier implementation. Drawing from international precedents, trading volume may decline 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 passage. In contrast, regulatory reforms surrounding the 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 Just a Local Matter?

South Korea is set to hold its 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, following the United States and China. This status is not merely a result of marketing strategies. According to a report by the Financial Services Commission in 2024, 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 status. South Korean users consistently show strong interest in altcoins beyond Bitcoin and Ethereum. On-chain activity is also very active, making South Korea a valuable indicator of new projects' acceptance in the global market.

For many global projects, establishing a presence in South Korea has become a strategic entry point into the broader Asian market. This gives the upcoming election special significance, as key campaign issues now include cryptocurrency taxation, regulation of the Korean won stablecoin, and 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. The possibility of tightening or loosening regulations 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 crypto asset market, corporate entities are gradually being granted access to the cryptocurrency market. This gradual market opening 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 annual earnings exceeding approximately $1,850 starting from January 2025. However, this implementation has been delayed by two years.

An increasingly contentious point is that, despite individuals and companies currently generating income from cryptocurrency trading, they both benefit from the tax delay policy. According to the Financial Services Commission's roadmap, 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, the delay policy for individuals and companies is unlikely to be extended again. The government may seek legislative amendments to abolish the current delay policy and implement taxation earlier.

There have historically been political differences among parties regarding the tax delay issue. The Democratic Party initially advocated for raising the tax exemption threshold rather than delaying taxation, although it ultimately supported the delay policy. Depending on the election results, the policy may shift towards raising the deduction limit rather than maintaining the delay policy.

If taxation is implemented, trading volume on 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 on major platforms like WazirX and CoinDCX by 10% to 70%. Similarly, after the introduction of high tax rates in 2023, Indonesia's trading volume fell by about 60% year-on-year.

Although the proposed tax rate in South Korea is less aggressive, these examples indicate that local exchanges may experience a decline in trading volume of over 20%, with funds potentially shifting 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 via Facebook as part of his broader initiative to support youth asset formation. He also proposed lowering investment fees to improve accessibility.

• Kim Moon-soo (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 spot cryptocurrency ETFs under the banner of "expanding middle-class wealth."

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

The introduction of spot cryptocurrency 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 commence earnestly 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 barriers to entry and enhance accessibility.

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

2.3. Reevaluation of 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 multiple financial services, including Apple Pay, Google Pay, and various banking institutions.

After Jeong Jin-wan, the president of Woori Bank, raised the issue at a policy discussion meeting of the People Power Party, the debate over abolishing the "one exchange, one bank" principle began to heat up. He argued that the current structure poses systemic risks, limits consumer choice, and imposes unnecessary restrictions on corporate clients. Jeong called for a shift to a "one exchange, multiple banks" model.

As the presidential campaign unfolds, political parties are beginning to take positions. On April 28, the People Power Party included the abolition of the "one exchange, one bank" rule in its "seven digital asset commitments." The Democratic Party also seems to be internally reviewing the matter. However, a cautious attitude has since emerged within the Democratic Party, and it remains 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 caution is necessary, maintaining the current model based on concerns about market concentration and AML risks may need to be reevaluated. The argument that this rule prevents market monopolies is becoming increasingly unconvincing, as Upbit and Bithumb already control about 97% of the domestic market. Allowing multiple banks to collaborate could enhance competition by enabling exchanges to serve a broader user base. This may lead to lower fees and more innovative services for both retail and institutional users.

Concerns about AML risks also require more nuanced assessment. In reality, greater risks occur during the process of transferring funds 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 associated with allowing multiple banking relationships seem 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 program called "Project Han-Gang" to test a CBDC-based payment and settlement system. However, as global trends shift towards stablecoins, domestic demand for a Korean won stablecoin is growing.

Source: 21st Presidential Debate: First Presidential Debate

• Lee Jae-myung (Democratic Party):

• May 8: In an economic YouTube interview, he stated that a won-based stablecoin could prevent capital flight by creating a domestic alternative.

• May 18: In a televised debate, he emphasized that the won stablecoin would be backed by collateral reserves to ensure stability.

• Lee Jun-suk (Reform Party):

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

• Kim Moon-soo (People Power Party):

• April 28: Included a regulatory framework for stablecoins in his "seven digital asset commitments."

The first presidential debate on May 18 brought stablecoins into mainstream political discourse through the exchange between Lee Jae-myung and Lee Jun-suk. 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, proposals for a Korean won stablecoin remain 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 to maintain its competitiveness as a financial center.

Any meaningful progress will require 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 initiatives. Given the complexity of these issues, policy development is expected to proceed in a phased, medium- to long-term manner rather than rapidly changing after the election.

3. Gradual but Inevitable: Upcoming 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 Moon-soo has included Web3-related measures in his top ten campaign commitments. This indicates that, despite being relevant to the industry, Web3 issues are not prioritized in the current broader policy agenda.

Therefore, regulatory changes are expected to progress gradually, with discussions likely occurring alongside more urgent policy matters. However, the trajectory is clear: transformation is inevitable.

As mentioned earlier, the eventual implementation of cryptocurrency taxation is unavoidable. Additionally, legislative discussions surrounding security token offerings (STOs) are expected to resume. Investors and market participants should not underestimate these shifts. Stakeholders must begin preparing for a policy environment that will increasingly be regulated and compliant.