South Korean Party Seeks Votes with US Bitcoin ETF Access

Political parties in South Korea are making promises related to cryptocurrencies in order to gain support from voters ahead of the country’s parliamentary elections. The opposition Democratic Party has stated that if elected, they will remove restrictions on domestic and international exchange-traded funds (ETFs) that hold crypto tokens, including US Bitcoin ETFs. The approval of Bitcoin ETFs in January raised concerns from South Korea’s securities regulator about the potential violation of local laws in the distribution of these ETFs.

The Democratic Party’s Hwanseok Choi has stated that they plan to allow the trading of ETFs, both domestic and overseas, as part of their manifesto. The People Power Party, led by President Yoon Suk Yeol, aims to attract crypto voters by promising to delay taxes on profits from digital assets. These taxes were originally set to be implemented in 2025. Government statistics show that nearly six million South Koreans traded cryptocurrencies through registered exchanges in the first half of 2023, which represents approximately 10% of the country’s population. Around 7% of election candidates have disclosed their ownership of cryptocurrencies.

Data from the Korea Securities Depository reveals that crypto users in South Korea have invested over $200 million in shares of US-listed company MicroStrategy (MRST). The company’s significant exposure to Bitcoin has led some analysts to consider it as essentially a leveraged Bitcoin ETF. Despite these promises from politicians, South Koreans are expecting stricter regulations on crypto assets. Local financial authorities are preparing to introduce new rules for token listings on centralized exchanges in the coming weeks. It is anticipated that domestic exchanges will be prohibited from listing digital assets that have been affected by hacking incidents until the root causes are determined. Foreign digital assets will only be listed on domestic exchanges if they have a white paper or technical manual available for local investors.

South Korea’s forthcoming Virtual Asset Users Protection Act also imposes restrictions and regulations on crypto-related activities. This act prohibits the use of undisclosed important information, market manipulation, and illegal trading. It will go into effect on July 19, 2024. In February, the government updated the act, introducing significant fines and criminal penalties for violations. This includes the possibility of imprisonment for more than one year or fines ranging from three to five times the amount of illegal profits.