A crypto bull will enter the Blue House (South Korea's White House) this May and, apart from taking charge of the country, is poised to batter down the barriers to entry for its crypto market. With a string of new pro-crypto policies, incoming president Yoon Suk-yeol may yet unleash the untapped potential of his country's de-fi ecosystem.
On the campaign trail, Yoon promised to return tokens to victims of crypto theft, legalize ICOs, and increase the tax threshold for crypto earnings. Investors hope he may finally create a regulatory environment that enables crypto to flourish in South Korea.
If he succeeds, the effects could ripple across the region. Could Seoul's crypto scene become the next ‘Korean wave' to hit the shores of Asia?
Bullish Market, Bearish Regulators
A perception gap on cryptocurrency has endured in South Korea for some time. While many of its citizens dived in over consecutive ‘crypto crazes,' financial regulators have remained tepidly conservative.
As far back as 2017, techno-savvy South Korea was the world's third-largest market for Bitcoin trading, while 3 out of 10 surveyed salary workers held cryptocurrency. Fast forward to today, and crypto has broken right out of the office crowd, with that 30% coverage holding for the entire population.
Roughly 15.2 million South Koreans now hold crypto accounts, and 5.6 million actively trade, per a recent Financial Intelligence Unit study.
The age demographic has widened too. After the latest adoption boom early last year, the two country's largest cryptocurrency exchanges, Upbit and Bithumb, reported around half of their users were now in their 40s and 50s.
Yet regulators have not been quick on the uptake. Some, like Bank of Korea Governor Lee Ju-yeol, have dug in their heels. Lee, who in 2017 said cryptocurrencies were not currencies but a kind of commodity, last year remained adamant crypto assets had “no intrinsic value.”
Before Yoon came along, the South Korean National Assembly's finance committee was planning to levy a capital gains tax of 20% on all crypto profits above 2.5 million won (roughly US$2,105). This seemed designed to punish retail investors for trading crypto, considering the same tax is not levied on stock market profits until 50 million won (US$40,000).
Yet Yoon looks to raise that threshold, pledging zero tax on all trading profits up to 50 million won (approximately US$40,000), a move that has been widely praised by the country's traders and will likely incentivize more Koreans to get in on the trading game.
Industry leaders are also pushing new projects to lower entry barriers and diversify crypto adoption channels. Kookmin Bank, for instance, plans to launch the country's first crypto-based Exchange-traded Funds (ETFs), which have been largely missing from Asia's de-fi landscape.
This asset class would appeal to more cautious investors who don't want the pressure of betting on particular tokens but still seek exposure to crypto's growth in their portfolios.
Crypto games are another potentially explosive space, with Korean game studio Neowiz set to launch the world's first free-to-play, play-to-earn crypto-backed mobile golf game, Crypto Golf Impact.
Yet currently, Seoul's gaming authorities outlaw the domestic release of crypto games that issue cashable Non-fungible Tokens (NFTs), placing them within the same framework as gambling or speculative activity.
Decoupling crypto gaming from gambling laws is another way Yoon may free the industry from its legal shackles.
“Many of our users are looking to gain supplemental income by playing crypto games,” Philip Devine, CEO of Riveted Games, told Wealth of Geeks.
Devine says his company's NFT game, CryptoBlades, is popular in South Korea. Still, it has been harder to penetrate the South Korean market than in Southeast Asia due to the restrictions. Government backing, he says, would help assure users their in-game purchases could continue to generate yield for them.
Korea's Next Export?
South Korea is quite the trendsetter in Asia, from pop music to food to fashion, but could Yoon's approach to crypto be a new model for other countries to follow?
The region's regulators need inspiration.
Most Malaysians believe crypto is a good investment. However, its government remains puzzled about regulating it and still struggles to plug loopholes in the tax codes or stop electricity theft from Bitcoin miners.
Taiwan, long touted as a potential haven for projects exiting anti-crypto China, has not lived up to its potential, with slow and cautious regulations focused on preventing money laundering rather than seeding an industry.
Thailand is another mixed bag. Though new tax relief measures will please traders, the country also just banned crypto-based payments, which could put a lid on what had been a booming ecosystem throughout 2021.
Despite rising enthusiasm for crypto across the region, many Asian governments are still sitting on the fence, neither banning its use nor encouraging its development. Fresh off an election win and with five whole years to govern ahead of him, Yoon is uniquely positioned to create change.
If Yoon's government injects Korea's characteristic dynamism into its crypto industry, its neighbors may soon follow suit.
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This post was produced and syndicated by Wealth of Geeks.
Featured image: Pixabay.
Liam Gibson is a journalist based in Taiwan who regularly publishes in Al Jazeera, Nikkei Asia Review, Straits Times, and other international outlets. He also runs Policy People, a podcast and online content platform for think tank experts.