South Korea's upcoming presidential election on June 3 is more than just a domestic political event—it’s a pivotal moment for the global cryptocurrency ecosystem. As one of the world’s most active digital asset markets, second only to the United States and China, South Korea’s regulatory direction will reverberate across international markets.
With a daily trading volume of $5.4 billion and 9.7 million active users, the country serves as a critical gateway for global Web3 projects aiming to expand into Asia. The election has brought crypto-related policies—such as taxation, ETF approvals, stablecoin regulation, and banking access for exchanges—into the national spotlight, making it essential for investors and innovators worldwide to understand the potential outcomes.
This article explores four major shifts expected in the global crypto landscape following the election, based on current policy proposals and market dynamics.
Why South Korea’s Election Matters Globally
South Korea is widely recognized as the third key hub in the global Web3 ecosystem. According to the Financial Services Commission’s 2024 report, the country sees ₩7.3 trillion ($5.4 billion) in daily crypto trading volume, with over 20 million registered accounts and nearly 10 million active traders.
👉 Discover how global markets react to regulatory shifts in key crypto hubs like South Korea.
Beyond raw numbers, Korean investors are known for their appetite for altcoins beyond Bitcoin and Ethereum, driving significant on-chain activity. This makes South Korea a real-time barometer for new project adoption and market sentiment.
For international blockchain ventures, launching in Korea often serves as a strategic entry point into broader Asian markets. As such, any regulatory changes post-election—whether tightening or liberalizing—will directly impact how global projects structure their offerings and compliance strategies.
1. End of the Crypto Tax Deferral Era
Currently, South Korea has postponed the implementation of virtual asset taxation until 2027. Originally set to begin in January 2025, the tax would have imposed a 20% levy on annual gains exceeding approximately $1,850.
However, with plans to allow listed companies and registered investment firms to enter the crypto market starting in late 2025, the government is under increasing pressure to finalize a clear tax framework.
It is highly unlikely that the deferral will be extended again. The next administration may push for legislative changes to implement taxation earlier, aligning corporate and individual obligations.
Historical precedents from other markets suggest significant consequences:
- In India, a 30% tax on crypto gains and a 1% transaction withholding tax led to a 10–70% drop in trading volumes on major platforms like WazirX and CoinDCX.
- Indonesia saw a ~60% year-on-year decline in trading activity after introducing high crypto taxes in 2023.
While South Korea’s proposed rates are less aggressive, a volume drop of over 20% on domestic exchanges is still likely if taxes are enforced. This could accelerate capital flight to offshore platforms offering more favorable tax environments.
Political stances vary: while the Democratic Party initially favored raising tax-free thresholds instead of delaying enforcement, all major candidates now acknowledge the need for a sustainable revenue model. The post-election consensus may lean toward moderate taxation with adjusted deductions rather than indefinite deferrals.
2. High Likelihood of Spot Crypto ETF Approval
One rare area of bipartisan agreement among top candidates is support for spot cryptocurrency ETFs.
- Lee Jae-myung (Democratic Party): Announced support via Facebook on May 6, framing ETFs as tools for youth wealth creation and proposing reduced investment fees.
- Kim Moon-soo (People Power Party): Included spot crypto ETFs in his "Top 10 Economic Promises" under the banner of middle-class financial growth.
- Lee Jun-seok (Reform Party): Suggested holding Bitcoin through ETFs as part of a national strategic reserve.
👉 See how ETF approvals can transform retail access to digital assets worldwide.
This cross-party alignment significantly increases the chances of early approval post-election, potentially positioning South Korea alongside the U.S. and Canada in offering regulated spot Bitcoin ETFs.
The introduction of ETFs would not only boost market legitimacy but also foster healthier competition. Traditional exchanges may respond by lowering fees or improving services to retain users. For smaller investors, ETFs offer a lower-barrier, regulated way to gain exposure to crypto without managing private keys or navigating complex platforms.
Long-term, this could catalyze further financial innovation—paving the way for crypto-linked derivatives, index funds, and hybrid financial products that bridge traditional finance (TradFi) and decentralized finance (DeFi).
3. Reevaluating the “One Exchange, One Bank” Rule
To combat money laundering risks, South Korea enforces an informal “one exchange, one bank” policy. Under this system, each licensed crypto exchange partners with only one commercial bank for real-name account issuance:
- Upbit → K-Bank
- Bithumb → KB Kookmin Bank
This contrasts sharply with jurisdictions like the U.S., where platforms like Coinbase integrate with multiple banks and payment systems (e.g., Apple Pay, Google Pay).
Critics argue this model creates systemic bottlenecks, limits consumer choice, and hampers institutional adoption. Woori Bank CEO Jeong Jin-wan recently called for reform during a parliamentary discussion, advocating for a “one exchange, multiple banks” model.
The People Power Party has formally included abolishing this rule in its “Seven Digital Asset Promises.” The Democratic Party is reviewing the issue internally but remains cautious due to regulatory concerns.
Despite caution from regulators, maintaining this restriction may no longer be justifiable:
- Market concentration is already extreme: Upbit and Bithumb control ~97% of domestic trading volume.
- Anti-money laundering (AML) infrastructure has improved significantly since the Travel Rule implementation.
- Real risks lie in cross-border transfers to unregulated offshore exchanges—not domestic banking integrations.
Allowing multiple banking relationships could enhance competition, reduce fees, and enable better services for both retail and institutional users.
4. The Future of a Korean Won Stablecoin
While South Korea has focused on its central bank digital currency (CBDC)—the “Project Han-Gang” pilot—demand for a privately issued KRW-pegged stablecoin is growing.
Key developments:
- Lee Jae-myung: Advocated for a reserve-backed KRW stablecoin to prevent capital outflows.
- Lee Jun-seok: Questioned AML clarity in such proposals during a televised debate.
- Kim Moon-soo: Committed to establishing a regulatory framework for stablecoins.
The May 18 presidential debate marked the first time stablecoins entered mainstream political discourse in Korea. While support exists in principle, detailed frameworks—especially around collateral transparency, issuer eligibility, and compliance—are still absent.
Regional trends add urgency: Singapore and Hong Kong are actively promoting local-currency stablecoins. To remain competitive as a financial hub, South Korea may face increasing pressure to act.
Still, immediate implementation is unlikely. Any meaningful progress will require comprehensive legislation addressing:
- Who can issue stablecoins?
- How reserves are audited and disclosed?
- How AML/KYC protocols are enforced?
- How stablecoins coexist with the CBDC roadmap?
Expect a phased, medium-to-long-term approach rather than rapid change.
Conclusion: Gradual but Inevitable Transformation
While full-scale regulatory overhaul won’t happen overnight, the trajectory is clear: regulation is coming, and it will reshape how crypto operates in one of Asia’s most influential markets.
Key takeaways:
- Crypto taxation will likely be implemented before 2027.
- Spot ETF approval is highly probable due to cross-party consensus.
- Banking restrictions on exchanges may loosen over time.
- KRW stablecoin development will proceed slowly but gain momentum.
For global market participants, South Korea remains a bellwether. Its evolution reflects broader trends: increasing institutional involvement, tighter compliance demands, and growing integration between crypto and traditional finance.
Staying ahead means understanding not just technology—but policy. And in 2025, few elections will shape that landscape more than South Korea’s.
Frequently Asked Questions (FAQ)
Q: When is South Korea’s next presidential election?
A: The election is scheduled for June 3, 2025.
Q: Will crypto taxes start in 2025?
A: No—the official start date has been postponed to 2027. However, early implementation by the new administration is possible given ongoing financial market reforms.
Q: Are Bitcoin ETFs likely to be approved in South Korea?
A: Yes. All leading candidates have expressed support for spot crypto ETFs, making approval highly likely within the first year of the new government.
Q: How might crypto regulations in South Korea affect global markets?
A: As a top-three trading hub by volume and innovation adoption rate, regulatory changes in Korea often influence investor behavior across Asia and inspire similar debates in other developed economies.
Q: Could Korean users move to offshore exchanges?
A: Yes—especially if domestic taxes increase or services become restricted. This trend has already been observed in countries like India and Indonesia after strict regulations were introduced.
Q: Is a Korean won stablecoin coming soon?
A: Not immediately. While political support exists, creating a legal and regulatory foundation will take time. Look for pilot programs or limited trials within 2–3 years.