Four major changes in the global cryptocurrency market after South Korea's presidential election

Author:Ryan Yoon , Tiger Research

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

Summary of key points

• South Korea is the core Web3 hub: South Korea has become the third largest cryptocurrency market in the world after the United States and China with a daily trading volume of $5.4 billion and 9.7 million active users. It is a key benchmark for global projects to enter Asia.

• Taxes may lead to a decline in transaction volumes: Although the implementation of cryptocurrency tax is currently delayed until 2027, the new government is likely to implement it in advance. Drawing on international precedents, transaction volumes may drop by more than 20%.

• There is a high possibility of ETF approval; other reforms may face delays: All major candidates support the introduction of Bitcoin spot ETFs, increasing the possibility of their early adoption. 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 June presidential election only relevant to local

areas?**

South Korea is scheduled to hold a presidential election on June 3. While this seems to be a local political event, its influence has surpassed national boundaries due to the country's influence on the global cryptocurrency market.

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

Investor behavior further consolidates this position. South Korean users have always shown strong interest in altcoins other than Bitcoin and Ethereum. The on-chain activity is also very active, making South Korea a valuable indicator to measure 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 for entering the broader Asian market. This makes the upcoming election special, as key campaign issues now include cryptocurrency taxes, Korean won stablecoin regulation and approval of cryptocurrency ETFs.

These developments are not limited to domestic stakeholders. Investors and project operators around the world must also pay attention to election results. There are possibilities for tightening and deregulation, 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 happen after the South Korean presidential

election?**

Source: Tiger Research

2.1. End of the cryptocurrency tax extension policy

According to the Financial Services Commission’s roadmap on enterprises’ participation in the crypto asset market, corporate entities are being gradually granted access to the cryptocurrency market. This gradual market opening practice inevitably requires corresponding comprehensive reform of the tax framework.

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

A growing point of contention is that while both individuals and companies currently generate revenue from cryptocurrency transactions, they both benefit from tax deferral policies. According to the Financial Services Commission’s roadmap, starting from the second half of 2025, listed companies and registered professional investment companies will be allowed to invest in virtual assets through company accounts.

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

The political stances of various political parties have always been different on the issue of tax extensions. The Democrats initially advocated raising the tax exemption threshold rather than delaying taxation, although it ultimately supported the deferral policy. Depending on the election results, policy may shift to increasing deduction limits rather than maintaining the extension policy.

If the taxation is implemented, trading volumes on domestic exchanges are likely to drop significantly - consistent with international precedents. In 2022, India imposes a 30% tax on cryptocurrency earnings and introduces a 1% withholding tax on all transactions. This has caused transaction volumes to drop by 10% to 70% on major platforms such as WazirX and CoinDCX. Similarly, Indonesia's trading volume fell by about 60% year-on-year after the introduction of high tax rates in 2023.

Although South Korea's proposed tax rates are less aggressive, these examples suggest that trading volumes on local exchanges may drop by more than 20%, while funds may turn to offshore platforms.

2.2. Introduction of cryptocurrency ETFs

_Source: Tiger Research
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• Lee Jae-ming (Democratic Party): On May 6, Lee Jae-ming announced his support for spot cryptocurrency ETFs through Facebook as part of his broader initiative to support youth asset formation. He also proposed to reduce investment costs to improve accessibility.

• Kim Woo-sung (National Power Party): On April 27, he expressed his open attitude to allow public institutions to invest in the cryptocurrency market. His ten core policy commitments include the introduction of spot cryptocurrency ETFs under the banner of “middle-class wealth expansion.”

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

The introduction of spot cryptocurrency ETFs is the only policy proposal among leading candidates to reach a cross-party consensus, making it one of the most likely outcomes to be achieved in the near term. Policy discussions are expected to be serious soon after the elections are over.

If spot ETFs are introduced, they will naturally compete with existing exchanges that promote spot trading in Bitcoin. This will promote healthier market dynamics and improve overall service quality. For investors, especially those with smaller portfolios, lower fees can lower barriers 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 vehicles.

2.3. Re-examine the “one exchange, one bank” model

In order to manage the risk of anti-money laundering (AML) in the cryptocurrency field, South Korea has always maintained the implicit "one exchange, one bank" principle. Under this model, each licensed cryptocurrency exchange is only allowed to cooperate with one commercial bank to issue a real-name verification deposit account. For example, Upbit only works with K-Bank, while Bithumb is linked to KB National Bank.

This framework contrasts with jurisdictions such as the United States, where platforms like Coinbase provide integration with a variety of financial services, including Apple Pay, Google Pay, and various banking institutions.

At the National Power Party MP policy discussion, after Jeong Jin-wan, president of Youli Bank, raised the issue, the debate on abolishing the principle of "one exchange, one bank" began to heat up. He believes that the current structure has systemic risks, limits consumer choices, and imposes unnecessary restrictions on corporate customers. Zheng called for a shift to the "one exchange, multiple banks" model.

As the presidential campaign unfolds, political parties begin to take their positions. On April 28, the National Power Party will abolish the "one exchange, one bank" rule into its "seven major digital asset commitments". The Democrats also seem to be reviewing the matter internally. However, there has been a cautious attitude within the Democratic Party since then, and it is not clear whether the issue will be reflected in the formal campaign commitment. Financial regulators have also maintained a cautious stance, indicating that any change may require long-term review.

While regulatory prudence is necessary, maintaining the current model based on concerns about market concentration and anti-money laundering risks may require reconsideration. The view that the rule prevents market monopoly is increasingly unconvincing, as Upbit and Bithumb have controlled about 97% of the domestic market. Allowing multiple banks to work together can strengthen competition by enabling exchanges to serve a wider 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 a more detailed assessment. In fact, greater risks occur during the transfer to overseas exchanges. Since the implementation of the Travel Rule and the improvement of compliance infrastructure, South Korea is now operating under stricter international monitoring standards. Against this background, the systemic risks posed 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. Bank of Korea is currently conducting a pilot program called the Project Han-Gang to test a CBDC-based payment and settlement system. However, domestic demand for Korean won stablecoins is growing as global trends turn to stablecoins.

_Source: 21st Presidential Debate: The First Presidential Debate
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• Lee Jae-ming (Democratic Party):

  • May 8: Stablecoins based on Korean won can prevent capital flight by creating domestic alternatives, said in an economic YouTube interview.

  • May 18: In a television debate, the Korean won stablecoin will be backed by a mortgage reserve to ensure stability.

• Li Junxi (Reform Party):

  • May 18: Questioning the feasibility of Li Zaiming's proposal is the reason for the lack of clarity in the stablecoin issuance.

• Jin Wuxing (KMT):

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

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

At this stage, the proposal for the Korean won stablecoin remains visionary, not operational. It is unlikely to be implemented immediately after the election. 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 up 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 an anti-money laundering agreement and defining the relationship between stablecoins and CBDC programs. Given the complexity of these issues, policy development is expected to be advanced in a phased, medium- and long-term manner rather than changing rapidly after the election.

3. Gradually but inevitable: upcoming changes

While the policy shifts discussed are significant for the industry, they are unlikely to be achieved in the near term. Among the main presidential candidates, only Kim Moon-soo has included Web3-related measures in its top 10 campaign commitments. This suggests that despite its industry relevance, the Web3 issue is not prioritized in the current broader policy agenda.

Therefore, regulatory changes are expected to advance 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 securities token issuance (STO) are expected to resume. These shifts should not be underestimated for investors and market participants. Stakeholders must begin preparing for an increasingly standardized and compliant policy environment.