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South Korean Elections & Crypto: Parties Pledge Digital Asset Proposals to Win Over Voters

Published April 8, 2024 12:17 PM
Shraddha Sharma
Published April 8, 2024 12:17 PM

Key Takeaways

  • Ruling and opposition parties in South Korea are incorporating cryptocurrency proposals to woo crypto investors.
  • The People Power Party, led by President Yoon Suk Yeol, promises to delay digital asset taxes.
  • The Democratic Party plans to remove restrictions on cryptocurrency-related exchange-traded funds (ETFs).

South Korea is gearing up for its national assembly elections on April 10, 2024. The election spotlight has turned to woo crypto investors, estimated to be 4% of the Korean population. With over 8m  South Koreans registered with the largest crypto exchange, Upbit, alone, the stakes are high for both the ruling People Power Party and the opposition Democratic Party.

South Korea’s Crypto Election Pledges

The People Power Party, under President Yoon Suk Yeol, has pledged to delay the taxation of digital assets, reported Bloomberg . The move is seen as an effort to alleviate the financial pressures on crypto investors as South Korea is an attractive market in Asia.

On the other side, the Democratic Party has proposed to lift existing restrictions on cryptocurrency ETFs. Hwanseok Choi, a policy official from the Democratic Party, noted the importance of allowing both domestic and international ETFs to operate freely, suggesting a push towards creating  “sound markets, safe investments, and diverse business opportunities.”

The digital asset investor base in Korea is large. As per Statista, 8m investors are registered with the largest crypto exchange, Upbit. As per official figures, 6m or 10% of the country’s population participated in the market in H1 2023.

Some analysts say that politicians are leveraging crypto more as a strategic electoral asset than as an innovation they wish to foster.

Regulatory Challenges in South Korea

Despite the forward-thinking proposals, the reality of implementing them faces some regulatory challenges. South Korean authorities have been discussing the potential of Bitcoin ETFs. However, the securities regulator reportedly noted that local brokering of cryptocurrency products could violate existing laws, making digital assets integration into the mainstream financial system difficult.

In parallel, the city of Pohang is aiming  to collect over KRW 6.6 billion in local crypto tax arrears to ensure tax compliance. The amount is 40% of the total carried-over arrears which comes to 16.6 billion.

The Kimchi Premium Ahead of Elections

Amid the development, the value of cryptocurrencies in South Korea has seen a rise reflected by the so-called “kimchi premium.” This term refers to the higher prices of cryptocurrencies on South Korean exchanges compared to other global markets. According to Cryptoquant, the Korea Premium Index witnessed reached nearly 10% in March. In April, the premium has come down to around  6%.

Crypto Politics in South Korea

South Korean parliamentary elections are an intersection of crypto policy and politics. Parties want to leverage digital asset proposals to woo a technologically savvy and financially participating electorate. The outcome of the elections will have implications for the crypto framework.

In Asia and globally, South Korea is a crucial market. Prior to the elections amid a strong Bitcoin Market, the Kimchi Premium also saw a surge. The market variable provides an arbitrage opportunity to the investor base

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