The following is an excerpt from the latest issue of Bitcoin Magazine Pro, Bitcoin Magazine's premium markets newsletter. To be among the first to receive these insights and other on-chain Bitcoin market analysis directly to your inbox, subscribe now.
As South Korea approaches its next legislative elections in 2024, both the current ruling party and the main opposition have pledged to institute several pro-Bitcoin policies, most notably approving a Bitcoin exchange-traded fund.
On April 10, 2024, the Republic of Korea will hold its legislative elections, which are held every four years. Regardless of the outcome, the president will not change, as they both serve five-year terms and are therefore elected through completely separate procedures, thanks to a flaw in South Korea's constitution. In fact, before this election, the party that controls the majority of seats does not hold the highest office in the country, and will not have the opportunity to contest this until 2027. However, there is one fact that makes these distinctions less significant from a Bitcoiner's point of view: take both Both parties take the unusual step of making similar pledges to support Bitcoin.
Although there are 6 different parties theoretically competing for 300 seats in this election, 4 of them each have single-digit numbers. The real contenders are the conservative People Power Party, which currently holds the presidency, and the more liberal Democratic Party, which currently holds an additional 50 seats. Moreover, opinion polls currently support a positive result for the Democratic Party of Korea, leading to the unenviable possibility that “People Power” may take over the leadership position and its ability to pass legislation is almost non-existent. It is likely for these reasons that the party has chosen to embrace radical new incentives, and this is where Bitcoin comes into play.
Rumors of a pro-Bitcoin move to PPP first emerged on February 19, 2024, when its representatives made comments to a local newspaper that a more comprehensive framework for regulating cryptocurrencies should become a priority. They claimed that until this new framework exists, the wisest option may be to eliminate all capital gains taxes on Bitcoin or other cryptocurrencies until relevant legislation is reached and signed. However, legislation like this would be a difficult task, and PPP spokesmen have claimed that it may be necessary to continue such a tax pause for two years. This appears to be a particularly clumsy attempt to trap votes, especially since these taxes are currently in limbo, but it was not the only effort.
The PPP went on to state on the same day that the party was considering a wide range of pro-Bitcoin options, particularly by easing a series of restrictions on institutional investment. Not only did they pledge to create a “Digital Assets Promotion Commission” with special authority over digital asset regulation, the PPP also made several vague statements on several specific policy reforms, particularly the crown jewel: the Bitcoin Spot ETF. It was widely speculated that these vague promises were a cynical move aimed at attracting the support of vulnerable youth, especially given that data released by the national tax agency claims that 80% of cryptocurrency users are in the 20-39 age group. These moves may have been made with little real affinity for Bitcoin, but the next development turned the whole situation around.
The next day, the opposition stole the show from the PPP when the KDP made several concrete pledges, most notably allowing retail investors access to Bitcoin ETFs. Their plan specifically stipulates that these purchases must go through an individual savings account, so corporate interests will not be able to use it for serious multi-billion dollar deals. The Democratic Party of Korea also made several vague hints about removing other barriers to institutional legislation, but announced that a comprehensive proposal to “revitalize and institutionalize” the digital assets space will be released on Wednesday, February 21. This political turmoil prompted the PPP to respond in kind by upgrading its general pro-Bitcoin comments into specific election promises.
This presents us with a very unusual situation: regardless of the political establishment's true feelings about Bitcoin or any other digital asset, the need to win the support of young people in a particularly contentious election made either option a pro-Bitcoin choice. But how likely are these politicians to follow through with this move, and what might it look like for South Korea? To answer these questions, it is important to look at some basics in its overall economy. By all accounts, things are going well: Although South Korea has recently seen inflation, with the money supply reaching the highest level since 1970 during the fourth quarter of last year, that number has cooled significantly. Furthermore, the Consumer Price Index (CPI) has also declined over the past few months, showing that the cost of goods such as housing, food or electricity is also declining.
An environment like this generally rules out one of the most notable use cases for Bitcoin's worldwide adoption, namely its use as a store of value. It seems unlikely that large numbers of South Koreans would seek to maintain significant savings in won, and they are unlikely to use it for international transfers. However, South Korea has several distinct advantages as a potential new Bitcoin hub. In 2022, an estimated 4% of South Koreans owned various digital assets, although this number has been growing significantly. Fewer than 14% of Americans held any over the same period. In other words, mass adoption has not been a major impediment to the US's status as a global Bitcoin hub, with a wide range of active developers and revolutionary blockchain projects, and it likely won't pose a barrier to South Korea either. South Korea is a developed economy with a strong technology sector, and its stable inflation will be a necessary requirement for the emergence of a certified digital asset industry.
In addition, there is one crucial point in South Korea's favor: as both major parties have pointed out, Bitcoin is very popular among the country's youth. Not only has the country with dense population centers enjoyed a high level of internet connectivity for decades, but millennials have a vivid memory of the 1997 currency crisis, which prompted South Korea to resort to bailouts from the International Monetary Fund. These factors in particular have led a growing number of young Koreans to show interest in an alternative economic vision, and Bitcoin has been there to fuel this vision. The number of Bitcoin users may be small, but there are several reasons to believe that it could become fertile ground for future development.
In other words, it is very likely that the pro-Bitcoin initiatives endorsed by both parties will be able to stimulate real maturation of the nascent industry. Between the two sets of pledges, it appears at first glance that the DPK pledges may be more useful in this regard: the ETF's proposal is not a call for the financial institution to dominate the market, and its upcoming framework is clearly aimed at enabling a new regime. local industry. However, the public-private partnership proposal is also encouraging, and its plan to establish a cryptocurrency regulatory body could also provide many opportunities.
No matter how you slice it, Bitcoin has taken the world by storm since the US approved an exchange-traded fund (ETF), and countries are falling like dominoes to enact similar pro-Bitcoin legislation. Even Japan, South Korea's close neighbor, has considered taking steps to boost its own industry. Regardless of how the nation decides to swing between the two major policy options, it is clear that the decision on Bitcoin has already been made. We can look forward to a new golden opportunity coming to South Korea, and know that the strength of Bitcoin may create similar opportunities elsewhere. After all, with the way Bitcoin is growing, such success could come anywhere. No matter where you are, you may be asked to choose between Bitcoin and Bitcoin, and this makes the bet a sure thing.
