South Korea’s April 10 Election: What’s at Stake for the Crypto Universe

In March 2022, Yoon Suk Yeol, a former prosecutor, secured the South Korean presidency with a narrow victory of only about 1% or approximately 247,077 votes. This was the closest presidential election outcome in the country’s history.

Approximately two months after that, a collapse of the Terra stablecoin caused around $60 billion in losses worldwide. Over 280,000 South Korean residents were among those affected.

Approximately 280,000 South Koreans have invested in cryptocurrencies, while the number of crypto users was reported to be around 6.27 million in September 2023 by prosecutors.

In the upcoming election in South Korea, cryptocurrency policies have emerged as a key factor, potentially influencing the outcome more so than in the previous election. If approximately 247,078 voters had made their decision based solely on these policies, the data indicates that the election result could have been changed.

Young individuals hold significant influence in shaping the future of a country with a population of approximately 52 million, according to experts. This influential demographic dominates the crypto industry, which has recently experienced intense activity and transformation, moving beyond the influence of figures like Do Kwon and Terra. The political pledges related to cryptocurrency might have served as incentives for voters in this sector, sparking their engagement.

2024 Legislative Election

On April 10, 2024, the country will conduct legislative elections. Over 300 seats in the national assembly are up for grabs, with numerous parties and alliances vying for victory. It’s anticipated that two major contenders will emerge: President Yoon Suk Yeol’s conservative People Power Party (PPP), aiming to boost its current seat count of 114, and the liberal Democratic Party of Korea (DPK), hoping to maintain its control with 156 seats.

Every fourth year, South Korea holds legislative elections. In the most recent one in 2020, the liberal party (Democratic Party of Korea or DPK) secured a clear victory. At that time, cryptocurrencies didn’t hold the significance they do now, so their influence was likely limited.

In the upcoming election, it’s anticipated that no party will secure a clear majority, making every voting bloc, including those with an affinity for cryptocurrency, potentially influential. According to a legal expert based in Seoul, the youth demographic, specifically those in their 20s and 30s, played a pivotal role in the tight presidential race of 2022. However, it remains uncertain if crypto-conscious voters will align as a single voting bloc.

Abel Seow, BitGo Asia-Pacific director based in Seoul, remarked that a close election is to be expected. However, it’s uncertain if cryptocurrency will play a decisive role. What I can assure you is that as time goes on and with each cycle, the market continues to expand significantly. Not only individual investors but also traditional corporations are getting involved. So, once these corporations enter the scene with a crypto focus, elections could potentially be influenced by this sector.

Crypto-related political promises

During the 2022 presidential election, President Yoon Suk-Yeol made a commitment to limiting taxes on cryptocurrency profits and supporting the legalization of Initial Coin Offerings (ICOs).

His cryptocurrency commitments may have influenced the outcome of the tightly contested election, but it’s uncertain. However, he failed to deliver on his word regarding Initial Coin Offerings (ICOs). With the backing of both parties in the legislature, taxes were postponed instead of being restricted.

The possibility of crypto influencing elections in South Korea is a reason why both major political parties have recently made new promises related to cryptocurrencies before the upcoming election.

Their differing views on upcoming crypto taxation laws are reflected in the subtly distinct pledges they have made.

The PPP has announced that they will focus on establishing regulations for cryptocurrencies before imposing taxes, thereby pushing back the planned crypto tax implementation set for January 2025.

Starting from 2025, the government will impose taxes on income derived from virtual assets, including their transfer or lending. The Democratic Party of Korea (DPK) plans to introduce a detailed taxation system and intends to keep the crypto taxation commencement in 2025. However, they are considering raising the tax rate for gains above 50 million Korean won ($37,316) from the current proposed 2.5 million Korean won ($1,865), which is equivalent to 22%.

The PPP additionally intends to create a “committee for promoting digital assets” that will suggest legislation and enforce penalties.

In relation to taxes and ETFs, Seow pointed out that both political parties have valid reasons for a tech-savvy voter. The debate over cryptocurrencies and the approval of a Bitcoin ETF during elections is evidence of the burgeoning digital asset market’s significance to South Korea’s economy, particularly for institutional investors.

Institutions in South Korea seeking crypto-friendly regulations might need to wait, as lawmakers in this significant election year could prefer keeping policies flexible until a global agreement is reached.

During this busy election season in South Korea, it’s uncertain that new market regulations for cryptocurrencies will be introduced, according to Kang. The South Korean government is cautious about potential conflicts in crypto regulation due to differing approaches from significant countries like the EU and the US.

South Korea’s upcoming election is one of several global elections this season that will significantly impact crypto regulations. However, according to Angela Ang, a senior advisor at TRM Labs, the US presidential elections are expected to have the most significant influence on crypto policy-making.