South Korea’s New Pro Crypto President: Will they lead again in the Crypto Space?
Over the years, South Korea has moved on from being a poor, authoritarian country devastated by war to an economically dynamic, culturally rich, and resilient democracy. It is also well known to the world for its world-famous boy-band BTS and its recently award-winning Netflix series Squid Game but it has also recently grabbed the attention of the crypto space with the election of a new Pro Crypto President — Mr. Yoon Suk Yeol. So, Let’s take a look at South Korean Crypto Regulation and how will Mr. Yoon’s plans affect the development of the crypto space within the country?
Regulations in South Korea
South Korea’s relation with the Crypto Space has gone way back to 2013 where Bitcoin interest was spiking up in the country but it refuses to recognize Bitcoin as a local currency due to the high amount of cyber crime present in the space. Despite all of these, South Korean Crypto Space continued to grow in 2017 with the emergence of young traders looking to make returns out of this new space.
The first Major regulation of the space came actually in that year 2017, where the Financial Services Commission banned all kinds of initial coin offerings (ICO) and trading of virtual currencies will be controlled and monitored. There were various rumors and pleas delivered to the Financial Services Commission in order to lift the ban and allow ICOs in the country but the ban has been upheld for now.
Then the next phase of regulations came in 2020, where the Korean authorities pushed through an initiative to begin taxing crypto trading profits. As mentioned before, crypto trading is quite popular in South Korea so much so that 10 percent of global transactions came from this country, so the amended law will levy 20% taxes on the profit earned from Crypto Transactions that are above the limit of 2.5 Million Korean Won or $2,200. The Korean National Tax Services also has expanded this crypto law to not only include domestic investors and business but also foreign crypto exchanges and business within the country. Although this was scheduled to take into effect in 2022, the lawmaker has deferred it to 2023 due to the gray area in which cryptocurrency is actually defined, as at the moment cryptocurrencies are neither considered a legal tender nor a commodity.
In 2021 the regulation began to turn their attention on the supervision of virtual assets, as the new legislation requires all virtual asset management providers to acquire an Information Security Management System (ISMS) Certification from KISA and also a contract with local banks to provide withdrawal and deposit accounts for exchange users under their real name. As a result of these regulations, 36 of the 63 crypto exchanges operating in the county had to close down due to being not compliant with the rules, 23 have received the ISMS Certification but have not secured a contract with local banks. Currently only 4 exchanges have managed to fulfill both requirements which are Upbit, Bithumb, CoinOne and Korbit and these exchanges accounted for 96.1% of the total deposits in the South Korea Crypto Space.
Also implemented in 2021 are the so — called Travel Rule by the Financial Action Task Force, which require financial institutions and virtual asset business to collect personal information of users in transaction over a million Korean Won (approximately $850) which will help eliminate the risk of money laundering and terrorism funding. This legislation should help ensure mass adoption of crypto within the country in the safest way possible and as of 2022, all of the major exchanges in South Korea have achieved compliance with the rule.
“The industry is now taking a step toward institutional acceptance and will work harder for mass adoption.”
Fast forward to now in 2022 where the presidential election started to heat up and one name comes to mind for the crypto space which is Mr. Yoon Suk Yeol from the People’s Power Party who won by the closest margin of 1%. His stance during the Pre — Election was always on looking to develop the crypto space which is quite the opposite from former-President Moon Jae-In’s crackdown on crypto exchanges last year. Speaking in the virtual asset forum in January, he also narrated his promise on deregulating the crypto industry.
“To realize the unlimited potential of the virtual asset market, we must overhaul regulations that are far from reality and unreasonable.”
Two of the more divisive promises made by him during the election were exploring ways to reverse the 2017 ICO ban in South Korea and lifting the tax free allowance from $2,000 to $40,000. This looks promising to restore the glory days of South Korea in the crypto space, but how will Mr. Yoon’s plan affect the crypto space?
How will this new regulation affect Crypto Space?
South Korea’s Crypto Space as what we know by now has been dominated by young millennials who are looking to make a living through cryptocurrency and it is also one of the most technology advanced country in the world so combining both of these factors then you will end up with a crypto powerhouse that is ready to make the leap forward. As of the end of 2021, there are more than 5.5 Million Crypto users with an estimated holdings of $45.9 Billion in the country and with the recent NFT craze going on in the country, it shows that the country really needs the right Regulations to protect this space.
Electing a new president that believes in forward thinking and innovation in ensuring the growth of the crypto space within the country. Not only that Mr. Yoon Suk Yeol NFT collection sparked a huge interest in innovation for the NFT space but his immediate election announcement was enough to cause an uptrend in the market.
Of course one of his main promises in raising the tax free allowance should encourage more South Koreans to engage with the space. Increasing the tax free allowance from $2,000 to $40,000 will then drive people to choose to invest their money in the crypto space rather than traditional investment platforms as they could gain benefits in saving taxes. This tax free allowance was as mentioned before scheduled to be delayed in 2023 but president-elect Mr. Yoon Seok-Yeol may push to delay that tax for yet another year to 2024.
The other promises in exploring ways to reverse the ICO ban have also been a great welcome by the space who has been looking to overturn it for years now. ICOs are a great way for businesses and projects to receive the funding needed to make their idea a reality, of course this should be done in a safe manner with an oversight from the government. With a massive amount of interest and demand for the crypto space, ICOs could be a great idea in building the next Binance or Ethereum in South Korea. Of course Mr. Yoon Suk Yeol of creating more crypto unicorns in South Korea can only be materialized if all these plans are carried out but it will not be long before we hear South Korea become a major player again in the crypto space.
We in Nagaya Technologies Pte. Ltd are excited with the president elect Mr. Yoon Suk Yeol enthusiasm in developing the crypto space within South Korea. These plans and regulations are not only good news for the growth of countless Nagaya Holders in South Korea but also for a number of our utility within the country. We hope that this would help us in giving more value to our holders through our Hybrid Crypto Asset called Nagaya. For more information regarding on the latest updates on Nagaya and our whitepaper, you can visit us at nagaya.io
Or you can talk to us at t.me/nagayaofficial