Crypto promises are flying in South Korea
South Korea's major political parties are promising crypto-related incentives to secure support from voters ahead of the country's upcoming general election.
The opposition Democratic Party has vowed to lift restrictions on domestic and international exchange-traded funds (ETFs) that directly hold crypto tokens, including United States Bitcoin ETFs, Bloomberg reported April 5. Following the approval of Bitcoin ETFs in January, South Korea's securities regulator warned that local distribution of these ETFs could violate local laws.
"We will allow ETFs, whether domestic or international," Democratic Party official Hwanseok Choi told Bloomberg, referring to the election manifesto. Also seeking to garner votes from crypto voters, the ruling People Power Party of Yoon Suk Yeol has promised to postpone taxes on profits from digital assets that are scheduled to come into force in 2025. 
Nearly six million South Koreans traded crypto through registered exchanges in the first half of 2023, according to government statistics. This figure represents 10 percent of the country's population. According to official data, a total of 7 percent of voters have invested in cryptocurrencies. Data from the Korea Securities Depository shows that crypto users have invested over $200 million in shares of US-listed firm MicroStrategy (MRST).
The company's heavy exposure to Bitcoin has led some analysts to label it "essentially a leveraged Bitcoin ETF." Despite politicians' promises, South Koreans are preparing for stricter regulations on crypto assets. Local financial authorities plan to issue new rules for token listings on centralized exchanges in the coming weeks. According to local media reports, local exchanges will be prohibited from listing digital assets affected by hacking incidents until the root causes are determined. In addition, foreign digital assets will be listed on local exchanges only if a white paper or technical guide is available for local investors. 
Additionally, South Korea's upcoming Virtual Asset User Protection Act prohibits the use of "material undisclosed information" about crypto, market manipulation, and illicit trading. The crypto law will come into force on July 19, 2024. In February, the government issued an update introducing significant fines and criminal penalties for violations, including imprisonment of more than one year or a fine of three to five times the amount of illicit gains.
