South Korea’s ruling party postpones plan to relax crypto regulations.

South Korea's governing party has indefinitely delayed regulations related to cryptocurrency, including the possible lifting of the ban on spot Bitcoin ETFs.

Ruholamin Haqshanas
Last updated: February 29, 2024 06:40 EST | 2 min read

South Korea’s Ruling Party Postpones Crypto Regulation Easing Plan

In a recent announcement, South Korea’s ruling People Power Party revealed that it has indefinitely postponed its plans to ease crypto regulations. This includes the lifting of the ban on local spot Bitcoin (BTC) exchange-traded funds (ETFs). The party’s decision comes after removing virtual assets from its list of policy priorities, effectively abandoning its plan to make a pledge to ease regulations ahead of the general election scheduled for April 10.

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South Korea’s Ruling Party Fails to Coordinate Crypto Regulations

One of the key factors behind the party’s decision is believed to be the challenges faced in aligning with the government and financial authorities on cryptocurrency policies. Despite the party’s proposed pledge to allow the issuance and trading of Bitcoin spot ETFs, the Financial Services Commission has maintained a strong negative perception of the investment risks associated with virtual assets.

While the U.S. Securities and Exchange Commission recently approved the Bitcoin spot ETF, the Financial Services Commission in South Korea still prohibits investment in and issuance of these products, citing the exclusion of virtual assets from the underlying assets defined in the Capital Markets Act.

Q&A:

• Q: Will the ban on local spot Bitcoin ETFs be lifted in the future?
• A: While there are no immediate plans to lift the ban, the People Power Party’s decision to postpone their pledge does not completely rule out the possibility of future changes in regulations. It will depend on the coordination and agreement between the government, financial authorities, and the ruling party.

Additionally, the People Power Party considered a plan to postpone taxation on virtual assets for two years and permit corporate investment in virtual assets, but insufficient consultation with relevant ministries and concerns over potential significant risks of loss prevented the inclusion of these proposals as pledges.

Opposition Party’s Pledge and Lack of Novelty

Notably, the Democratic Party of Korea’s “Digital Asset Institutionalization Pledge” already includes plans to allow Bitcoin spot ETFs and an increase in the deduction limit for virtual asset sales profits. The similarity in content between the People Power Party’s intended pledges and those already announced by the Democratic Party contributed to the decision to withhold their announcement. The party’s leadership felt that their pledges lacked novelty and would fail to attract attention.

Additional Information

It is important to mention that South Korean police are actively cracking down on crypto-powered drug trafficking. In recent months, officers in the capital Seoul made numerous arrests related to drug dealers and illegal “cryptoasset trading platform operators.” This ongoing effort aims to ensure the safety and integrity of the cryptocurrency industry.

Based on these recent developments, it is clear that South Korea is still grappling with the coordination of crypto regulations. While the ruling party’s decision to postpone easing regulations may disappoint some crypto enthusiasts, it also underscores the complexity involved in aligning various stakeholders’ views and priorities.

The future outlook for crypto regulations in South Korea remains uncertain. However, it is crucial for the government, financial authorities, and political parties to work together to establish a balanced and well-regulated crypto ecosystem that encourages innovation, safeguards against potential risks, and nurtures a thriving digital asset market.

Recommended reads:

1. South Korea’s Ruling Party Delays Proposal to Ease Crypto Restrictions
2. Understanding the Impact of Bitcoin ETFs on the Market
3. The Challenges of Regulating Virtual Assets: Lessons from South Korea
4. Exploring the Global Crypto Crackdown and Its Implications
5. South Korean Police’s Efforts to Combat Crypto-Powered Drug Trafficking

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