South Korea Elects Pro-Crypto President Lee Jae-myung: A New Era for Digital Assets

On June 3 at 8:00 PM local time, South Korea’s 21st presidential election concluded, with Democratic Party candidate Lee Jae-myung securing 49.42% of the vote to become the nation’s new president, defeating conservative rival Kim Moon-soo, who garnered 41.15%. Lee’s campaign, which has emphasized crypto-friendly policies since 2022, resonated with South Korea’s 9.7 million crypto traders—roughly 20% of the population—in a market valued at 104 trillion won ($74.5 billion) by the end of 2024, according to the Bank of Korea.

Lee Jae-myung’s Crypto Vision

Lee outlines four key initiatives to advance South Korea’s crypto industry:

Legalizing Spot Crypto ETFs: Lee aims to legalize spot cryptocurrency exchange-traded funds (ETFs), enabling broader investor access to digital assets.

Won-Pegged Stablecoin: He proposes a stablecoin tied to the Korean won to stabilize capital flows and reduce reliance on foreign stablecoins.

Clear Regulatory Framework: Lee seeks to establish transparent, innovation-friendly regulations to support crypto businesses and protect investors.

Pension Fund Crypto Allocation: He supports allowing the $884 billion National Pension Fund to invest in digital assets, potentially driving significant institutional capital into the market.

These policies target South Korea’s vibrant crypto ecosystem, which saw its market capitalization nearly double from 56.5 trillion won to 107.7 trillion won ($77.6 billion) in the second half of 2024, fueled by growing retail participation. The nation’s 9.7 million crypto users, up from 7.78 million in early 2024, highlight the sector’s cultural and economic significance.

A Shift from Past Challenges

Lee’s predecessor, Yoon Suk-yeol, made similar crypto-friendly promises in 2022 but faced resistance from the Financial Services Commission (FSC), which banned local trading of spot crypto ETFs, citing a lack of legal basis for assets like Bitcoin. However, recent developments signal a policy shift. FSC Chairman Kim Byung-hwan last month indicated openness to revisiting spot ETF regulations, inspired by their success in the U.S., and expressed readiness to work with the new government. This could enable Lee to succeed where Yoon stalled.

Crypto policy transcended party lines in this election. Kim Moon-soo, the conservative candidate, also pledged to legalize spot ETFs and streamline regulations, reflecting the sector’s electoral weight. South Korea’s crypto trading volume often surpasses that of its Kospi and Kosdaq stock indices, underscoring the industry’s dominance in retail investment. This bipartisan support suggests that, regardless of the winner, South Korea’s crypto market was poised for growth.

What’s Next?

The Bank of Korea’s 2024 report pegs South Korea’s crypto market at 104 trillion won ($74.5 billion), a significant leap driven by retail trading on platforms like Upbit and Bithumb. As one of the world’s most active crypto markets, South Korea’s crypto sector has thrived despite regulatory hurdles. The 2017 ICO ban and stringent KYC requirements have not dampened retail enthusiasm, with platforms like Upbit driving substantial trading volume. If President-elect Lee implements his crypto-friendly policy promises, South Korea’s crypto market is expected to grow even more vibrant.

While Lee’s election has not yet triggered immediate price spikes in major cryptocurrencies like Bitcoin, the prospect of ETF legalization and institutional investment could amplify the “kimchi premium,” where local crypto prices exceed global averages. The Bank of Korea has also raised concerns about stablecoin use, warning of risks to monetary sovereignty, which Lee’s won-pegged stablecoin aims to address.

Lee’s five-year term offers a chance to enact his ambitious crypto agenda, but challenges loom. Balancing innovation with investor protection will require close coordination with the FSC and alignment with global regulatory trends. The Bank of Korea’s cautious stance on stablecoins and the FSC’s evolving position on ETFs will shape policy outcomes. As South Korea cements its status as a global crypto leader, Lee Jae-myung’s presidency could catalyze growth in its $74.5 billion market, positioning the nation as a pivotal player in the digital asset landscape.