South Korea’s Ruling Party Puts Crypto Regulations on Hold
South Korea’s ruling People Power Party has decided to postpone its plans to ease cryptocurrency regulations, including the lifting of the ban on local spot Bitcoin (BTC) exchange-traded funds (ETFs). The party recently removed virtual assets from its list of policy priorities, effectively abandoning its plan to make a pledge to ease regulations. This decision comes as the party focuses on constituency nominations and personnel selection for the upcoming general election.
Challenges in Coordinating Crypto Policies
The main reason behind the party’s decision is believed to be the challenges faced in aligning with the government and financial authorities on cryptocurrency policies. The proposed pledge by the People Power Party included plans to allow the issuance and trading of Bitcoin spot ETFs. However, the Financial Services Commission has maintained a negative perception of the investment risks associated with virtual assets.
While the U.S. Securities and Exchange Commission approved Bitcoin spot ETFs last month, the Financial Services Commission in South Korea has prohibited investment in and issuance of these products. They cited the exclusion of virtual assets from the underlying assets defined in the Capital Markets Act.
In addition, insufficient consultation with relevant ministries and concerns over potential significant risks of loss prevented other proposals, such as postponing taxation on virtual assets for two years and permitting corporate investment in virtual assets, from being included as pledges.
Opposition Party’s Similar Pledge
The Democratic Party of Korea had already announced their “Digital Asset Institutionalization Pledge,” which included plans to allow Bitcoin spot ETFs and an increase in the deduction limit for virtual asset sales profits. The similarity in content between this pledge and what was intended by the People Power Party led to their decision to withhold their announcement. The party believed that their pledges lacked novelty and would fail to attract attention.
Police Crack Down on Crypto-Powered Drug Trafficking
Meanwhile, South Korean police are actively combating crypto-powered drug trafficking. In Seoul alone, officers made 452 arrests related to such crimes between June 2022 and December 2023. Just this week, three suspected drug dealers were arrested, along with 445 buyers and four illegal “cryptoasset trading platform operators.”
Hot Take: Crypto Regulations on Hold in South Korea
The ruling People Power Party in South Korea has decided to postpone its plans to ease cryptocurrency regulations, including the ban on local spot Bitcoin exchange-traded funds (ETFs). This decision comes as the party shifts its focus to constituency nominations and personnel selection for the upcoming general election. Challenges in coordinating crypto policies with government and financial authorities have contributed to this delay. The Democratic Party of Korea had already announced similar pledges, leading the People Power Party to withhold their announcement due to a perceived lack of novelty. As law enforcement continues its crackdown on crypto-powered drug trafficking, it remains to be seen when and how South Korea will proceed with crypto regulations.
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