Crypto Takes the Spotlight in South Korea’s Heated Presidential Race

South Korea is heading into a high-stakes presidential election on June 3 to choose Yoon Suk Yeol’s successor. Like the US, the nation’s estimated 15 million crypto investors, constituting at least 30% of its population, have become a pivotal voting bloc.

With this in mind, presidential candidates are ramping up digital asset policy proposals to win over young, tech-savvy voters. The allure becomes stronger amid rising demand for regulated investment products and financial inclusion.

South Korean Presidential Candidates Target Crypto Investors

Local media reports that the two frontrunners, the Democratic Party’s Lee Jae-myung and People Power Party’s Kim Moon-soo, lead the charge with pro-crypto platforms.

Both have reportedly pledged to legalize spot crypto ETFs (exchange-traded funds), a move currently banned under Korean law. These financial instruments would enable investors to gain exposure to Bitcoin and other digital assets through traditional stock markets.

“All three major South Korean presidential candidates support Bitcoin ETFs and institutional investment. Currently, Bitcoin ETFs and institutional investments are banned in Korea. 100% volume comes from retail,” noted Ki Young Ju, CEO of CryptoQuant, in a recent post on X.

According to The Korean Herald, Lee Jae-myung further distinguishes his campaign by proposing to develop a won-backed stablecoin market. The candidate aims to reduce reliance on foreign stablecoins like USDT and USDC and curb capital outflows.

“We need to establish a won-backed stablecoin market to prevent national wealth from leaking overseas,” read an excerpt in the report, which cited Lee during a policy discussion with economic content creators.

South Korea currently prohibits domestic stablecoin issuance. However, Lee’s plan would introduce a regulatory path under the upcoming Digital Asset Basic Act.

The proposed legislation, expected to be tabled this week, will cover digital assets’ legal status, issuance, and circulation. It will also require stablecoin issuers to register with the Financial Services Commission (FSC) and hold at least 50 billion won in reserves.

According to the report, domestic crypto exchanges recorded 56.8 trillion won ($40.8 billion) in outflows between January and March alone. Nearly half of these were tied to US dollar-based stablecoins.

However, critics warn of potential macroeconomic risks, citing the privilege of money creation being conferred on the private sector.

“Stablecoins are essentially another form of banking, creating money out of nothing,” Shin Bo-sung, senior researcher at the Korea Capital Market Institute, reportedly stated.

Bold Crypto ETF and Stablecoin Proposals

Institutional adoption is also in focus. Lee’s team reportedly proposes enabling large players such as the National Pension Fund to invest in digital assets once price stability standards are met.

These initiatives align with broader government efforts to lift the current ban on corporate crypto investment and integrate digital assets into capital markets. Lee Keun-ju, president of the Korea Fintech Industry Association, supports the ETF push.

“A Bitcoin spot ETF is not simply a product. It can be the gateway to broadening the connection between the digital asset ecosystem and the capital market,” he noted.

Still, skepticism remains, with Konstantin Tkachuk, co-founder of Titannet DAO, noting that it will stay until promises materialize.

“Sounds cool, but no celebration until proposals are on paper and their real benefits are clear,” Tkachuk shared in a post.

Meanwhile, some voters are wary of superficial promises, with one user noting a candidate proposing crypto-related policies but giving completely off-topic and incorrect answers when asked about the difference between USDT and USDC.

“Do they see the crypto scene in Korea as just a quick cash grab to exploit and abandon?” the user remarked.

Meanwhile, regulatory scrutiny is tightening. The Financial Supervisory Service (FSS) reported recently that 52.5% of suspicious crypto trades flagged between July and December 2023 involved investors in their 20s and 30s — the very demographic that the financial services industry is courting.

New rules under the Act on the Protection of Virtual Asset Users could also lead to criminal charges for unfair trading practices.

Elsewhere, as presidential candidates warm up to crypto in South Korea, the country is preparing the second phase of its crypto regulatory framework for release in H2 2025. The government also compelled Google to block 17 unregistered foreign crypto exchanges, signaling an assertive stance on investor protection.

With both opportunity and risk on the line, crypto has undeniably become a decisive issue in South Korea’s presidential election.