The South Korean election may trigger four major changes in the global crypto market

South Korea is scheduled to hold its presidential election on June 3, and the impact of this event is expected to extend far beyond its borders, having a profound effect on the global crypto market. As the world's third-largest crypto market, behind the United States and China, South Korea plays a key role in the Web3 space.

This article will explore the four major changes that may arise after the South Korean elections:

1. Cryptocurrency Tax Policy Adjustment

Currently, the taxation of virtual assets in South Korea has been postponed until 2027. However, as corporate entities are gradually allowed to enter the crypto market, a comprehensive reform of the tax framework seems inevitable. The new government is likely to terminate the postponement policy early and accelerate the taxation process.

If the tax policy is implemented, the trading volume of domestic exchanges may experience a significant decline. Referring to international experience, after introducing high tax rates, India's and Indonesia's trading volumes dropped by 10%-70% and about 60%, respectively. Although the tax rate proposed by South Korea is relatively mild, the trading volume of local exchanges may still decline by more than 20%, with some funds possibly shifting to offshore platforms.

2. The Introduction of Cryptocurrency ETFs

All major candidates have expressed support for the introduction of a Bitcoin spot ETF, making it one of the policies most likely to advance quickly after the election. The introduction of a spot ETF may have the following impacts:

• Compete with existing exchanges on fees to promote healthy market development.
• Lower investment thresholds and increase accessibility
• To pave the way for further financial innovation, such as derivatives, index funds, etc.

3. Reevaluation of the "One Exchange One Bank" Model

Currently, South Korea implements the "one exchange, one bank" principle, where each licensed cryptocurrency exchange can only cooperate with one commercial bank. However, this model is facing increasing scrutiny.

Allowing multiple banks to collaborate may:

• Strengthen market competition
• Bring users lower fees and innovative services
• Reduce market concentration

Despite the cautious attitude of regulatory agencies, this topic has sparked widespread discussion and may develop towards a more open direction in the future.

4. Development of the Korean Won Stablecoin

Although South Korea has previously focused more on the development of central bank digital currency ( CBDC ), the domestic demand for the Korean won stablecoin is growing as the global trend shifts towards stablecoins. Several candidates have expressed support for the development of the Korean won stablecoin.

However, the proposal for the Korean won stablecoin is still in the conceptual stage. To achieve substantial progress, a comprehensive legal and regulatory framework needs to be established, including:

• Identify qualified issuers
• Ensure collateral transparency
• Establish anti-money laundering agreement
• Define the relationship with the CBDC plan

Considering the complexity of these issues, relevant policies may be implemented in a phased and medium to long-term manner.

Conclusion

Although these policy changes are significant for the encryption industry, the likelihood of comprehensive implementation in the short term is low. However, the general direction of the changes has become clear. Whether it is the taxation of cryptocurrencies, the legislation on the issuance of security tokens (STO), or other regulatory measures, they all indicate that an increasingly standardized and compliant policy environment is taking shape. Investors and market participants should prepare for this transition in advance.