(Bloomberg) — Campaigns in South Korea’s parliamentary elections are underscoring the country’s status as one of the world’s largest crypto markets, with both major political parties touting related bids to win votes.
President Yoon Seok-yeol's People's Power Party has vowed to delay the introduction of a digital asset tax, while the opposition Democratic Party has promised to lift regulations on exchange-traded funds that directly hold tokens, including U.S. Bitcoin products.
Choi Hwang-seok, a policy expert from the Democratic Party and a member of the party's think tank, who also participated in the creation of the manifesto, said, “We intend to allow ETFs both domestically and overseas.'' .
Mr. Yoon is aiming to wrest control of the legislature from the Democratic Party-led progressive bloc in the April 10 poll. According to official statistics, more than 6 million Koreans, more than 10% of the population, participated in the cryptocurrency market through registered exchanges in the first half of last year. This represents a sizable group of potential voters in a crucial election.
ETF controversy
The United States gave the green light to ETFs that invest directly in Bitcoin in January, and these products have accumulated about $57 billion in total assets to date. South Korea's securities regulator quickly said that intermediating products in the country could be against the law, effectively blocking the potential outflow of speculative funds.
The move caused confusion and spooked many stocks. The People Power Party's manifesto makes no mention of the controversy, instead pledging to postpone the planned tax on crypto profits beyond the planned period of 2025.
South Koreans have been active in the latest digital asset bull market, and are known for their enthusiasm for not only market leader Bitcoin, but also smaller cryptocurrencies. His Upbit, the country's largest cryptocurrency exchange, consistently ranks among the world's top platforms in terms of trading volume.
South Koreans poured more than $200 million into shares of U.S.-listed Bitcoin holder MicroStrategy last month, according to data from the Korea Securities Depository Service. They also flocked to US crypto futures ETFs, which are permitted products.
Even election candidates are exposed, with about 7% owning cryptocurrencies, according to a Yonhap news report that analyzed asset disclosures.
crypto risk
The flip side of this speculative hostility is that cryptocurrencies are a highly risky sector. The country created the infamous Do Kwon and his doomed Luna and Terra USD tokens, which blew up over $40 billion when it collapsed in 2022.
But memories of the wipeout that affected hundreds of thousands of people are being overshadowed by the $900 billion surge in the cryptocurrency market this year. A dedicated investor protection framework will come into force in July, and both parties have indicated they also intend to pursue broader regulation of the industry.
Along with the SOPs set out by politicians, this signals the potential for further expansion of acceptance of digital assets in South Korea, reflecting broader Asian trends. In contrast, many US officials are hostile to cryptocurrencies.
Expectations are rising that spot crypto ETFs will eventually be allowed, raising the possibility that the crypto market will become more “widely established as an investment asset” in South Korea, said an alternative asset analyst at Hanwha Investment & Securities. Yumin Kim wrote: In a recent note.
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