South Korea Sudden News: Will Approve Bitcoin ETF

Author: Qin Jin, Carbon Chain Value

On April 10, South Korea will hold a legislative election that occurs every four years. Before the election, both the ruling party and the opposition have promised to approve a Bitcoin ETF.

We know that the primary audience for Bitcoin is predominantly young people. Previously, Argentine President Milei, Salvadoran President Bukele, and U.S. President Biden made statements, policies, and even dark "laser eyes" memes related to Bitcoin during their campaigns. Their actions can be seen as a campaign declaration aimed at young voters, or a self-redefinition directed at them. Through these two methods, they hope to help millennials and Generation Z, who live online, recognize their new identities and gain their support at the polls. The first two have successfully been elected president. The outcome for the latter will be revealed in November this year. Regardless of the outcome, Bitcoin has already become an important force that national leaders cannot ignore.

On February 19, Bitcoin Magazine reported that since the U.S. approved the spot ETF, Bitcoin has become a global sensation, with countries rapidly enacting similar laws to support Bitcoin like a game of dominoes. South Korea's neighbor Japan is even considering measures to promote its own Bitcoin industry. Regardless of how South Korea wavers between the two major political choices, the decision regarding Bitcoin has clearly been made. We can foresee that South Korea will welcome a golden new opportunity, and the power of Bitcoin may create similar opportunities elsewhere.

South Korea's Largest Political Party Promises to Approve Bitcoin ETF Before Election

With only a few weeks left until the South Korean election, both candidates have promised to approve the Bitcoin ETF. However, there are some subtle policy differences between the two proposals.

As the 2024 South Korean legislative elections approach, both the ruling party and the main opposition party have pledged to formulate several policies supporting Bitcoin, particularly the approval of the Bitcoin ETF.

On April 10, 2024, South Korea will hold its legislative election, which occurs every four years. Regardless of the outcome, the presidency will not change, as their term is five years and elected through a completely different process, thanks to a special provision in the South Korean constitution. In fact, before this election, the party controlling the majority of seats does not hold the highest national office and will not have the opportunity to run until 2027. However, from the perspective of Bitcoin players, one fact makes these distinctions less significant: both parties have made unusual moves, announcing similar commitments to support Bitcoin.

Although theoretically, six different parties are competing for 300 seats in this election, four of them have single-digit seat counts. The two real competitors are the conservative People’s Party (PPP) and the liberal Democratic Party (DPK), with the former currently holding the presidential seat and the latter having over 50 seats. More importantly, current polls support the Democratic Party achieving favorable results, leading to the possibility that the People’s Party may occupy a leadership position with almost zero legislative capability. Perhaps for these reasons, the People’s Party has chosen radical new incentives, which is where Bitcoin comes into play.

Rumors of the People’s Party supporting Bitcoin first emerged on February 19, 2024, when a representative of the party commented to a local newspaper that establishing a more comprehensive cryptocurrency regulatory framework should be prioritized. They stated that until this new framework is established, the safest option might be to eliminate all capital gains taxes on Bitcoin or other cryptocurrencies until relevant legislation can be drafted and signed. However, such legislation would be a daunting task, and a spokesperson for the People’s Party claimed it might be necessary to continue suspending taxation for two years. This seems like a particularly clumsy attempt to garner votes, especially considering that these taxes are currently in limbo, but it is not the only effort.

On the same day, the People’s Party also stated that it is considering a series of proposals to support Bitcoin, particularly by relaxing a series of restrictions on institutional investment. The People’s Party not only promised to establish a "Digital Asset Promotion Committee" dedicated to digital asset regulation but also made vague statements about some specific policy reforms, especially the crown jewel: the Bitcoin spot ETF. It is widely speculated that these vague commitments are a cynical move aimed at attracting young support, especially considering that data from the national tax agency shows that 80% of cryptocurrency users are aged between 20 and 39. These initiatives may have been taken in the absence of genuine affinity for Bitcoin, but the subsequent developments turned the situation upside down.

The next day, the opposition party stole the spotlight from the People’s Party, with the Democratic Party making several specific commitments, particularly allowing individual investors to purchase Bitcoin ETFs. Their plan specifically states that these purchases must be made through individual savings accounts, preventing corporate interest groups from utilizing it for multi-billion dollar trades. The People’s Party also vaguely hinted at eliminating other legislative barriers for institutions but announced that it would release a comprehensive proposal for "Activating and Institutionalizing the Digital Asset Sector" on February 21 (Wednesday). These political shocks prompted the People’s Party to respond by upgrading its general comments supporting Bitcoin to explicit campaign commitments.

This brings us to a most unusual situation: regardless of the political institutions' true views on Bitcoin or other digital assets, the need to win the support of young people in a particularly contentious election has made any choice a pro-Bitcoin option. However, how likely are these politicians to stick to their commitments? To answer these questions, it is important to look at some fundamentals of South Korea's overall economy. From all aspects, South Korea's economic performance is quite good: although South Korea has recently experienced inflation, with the money supply reaching its highest level since 1970 in the fourth quarter of last year, this figure has clearly stabilized. Additionally, in recent months, South Korea's Consumer Price Index (CPI) has also slowed down, indicating that the costs of goods such as housing, food, or electricity are also declining.

In such an environment, one of Bitcoin's primary uses globally, as a store of value, is generally excluded. A large number of South Koreans seem unlikely to maintain significant savings in Korean won, nor are they likely to use it for international remittances. However, as a potential new Bitcoin hub, South Korea does have some clear advantages. In 2022, an estimated 4% of South Koreans held various digital assets, although this number is significantly growing. In the same period, less than 14% of Americans held digital assets. In other words, while the U.S. has a large number of active developers and revolutionary blockchain projects, the large-scale adoption of Bitcoin has not become a significant obstacle to the U.S. becoming a global Bitcoin hub, and this may not be an obstacle for South Korea either. South Korea is a developed economy with a strong technology industry, and its stable inflation rate will be a necessary condition for the rise of the digital asset industry.

Moreover, there is a key point favorable to South Korea: as pointed out by the two major political parties, Bitcoin enjoys immense popularity among young people in South Korea. For decades, this densely populated country has not only had high internet connectivity but also a millennial generation that vividly remembers the 1997 currency crisis, which led South Korea to seek assistance from the International Monetary Fund (IMF). These factors have prompted an increasing number of young South Koreans to become interested in an alternative economic vision, and Bitcoin provides that vision. While the number of Bitcoin users may not be large, there are several reasons to believe it could become fertile ground for future development.

In other words, both parties' support for Bitcoin initiatives is likely to propel this young industry toward true maturity. Among these commitments, at first glance, the Democratic Party's promise may be more useful in this regard: their ETF proposal does not invite financial institutions to dominate the market, and their upcoming framework is explicitly designed to empower the domestic new industry. However, the People’s Party’s proposal is also encouraging, as its plan to create a cryptocurrency regulatory body could provide many opportunities.

Regardless, since the U.S. approved the spot ETF, Bitcoin has become a global sensation, with countries rapidly enacting similar laws to support Bitcoin like a game of dominoes. South Korea's neighbor Japan is even considering measures to promote its own Bitcoin industry. Regardless of how South Korea wavers between the two major political choices, the decision regarding Bitcoin has clearly been made. We can foresee that South Korea will welcome a golden new opportunity, and the power of Bitcoin may create similar opportunities elsewhere. After all, looking at Bitcoin's development, such success could emerge anywhere. No matter where you are, you may be asked to choose between Bitcoin and Bitcoin, which is a certain bet.