Crypto policies may dominate South Korea’s 2025 election agenda as 15M investors eye reforms

• South Korea’s election is scheduled for 3 June.
• Candidates propose legalising Bitcoin and crypto ETFs.
• Lee Jae-myung of the Democratic Party and Kim Moon-soo from the People Power Party are leading with pro-crypto proposals.

With over 15 million digital asset investors—nearly a third of the country’s population—crypto has emerged as a decisive issue in the election.

Candidates are competing to win the confidence of this tech-savvy demographic by pledging to legalise crypto spot ETFs and introduce won-backed stablecoins, policy shifts that could radically reshape the nation’s financial landscape.

Amid record capital outflows and demand for clearer regulation, both leading candidates have aligned their platforms with the rising crypto movement.

But as policy discussions heat up, sceptics question whether these promises will move beyond political theatre.

Crypto ETFs and pension fund access dominate the debate

Lee Jae-myung of the Democratic Party and Kim Moon-soo from the People Power Party are leading with pro-crypto proposals.

Both have committed to legalising spot crypto exchange-traded funds (ETFs), currently banned in South Korea.

These instruments would allow indirect investment in assets like Bitcoin through regulated stock exchanges.

Presently, crypto investment in South Korea is almost entirely retail-driven.

Institutional investment is restricted, and domestic funds such as the National Pension Service cannot legally participate.

That could change under Lee’s proposal to open digital asset investment to large institutions, provided price stability conditions are met.

This marks a significant shift in government thinking. Until now, South Korean authorities have maintained a ban on corporate crypto exposure.

However, recent commentary by leaders in the fintech industry, including the Korea Fintech Industry Association, suggests that a regulated ETF market could become a bridge between crypto and capital markets.

Lee pushes won-backed stablecoin and digital asset law

Lee Jae-myung is also pushing a stablecoin proposal aimed at reducing reliance on US-pegged stablecoins like USDT and USDC.

The plan would introduce a won-backed alternative under a proposed Digital Asset Basic Act expected to be introduced in parliament this week.

The bill would define the legal status of digital assets, their issuance and circulation, and set clear guidelines for stablecoin projects.

Under the draft framework, issuers would be required to register with the Financial Services Commission and hold reserves of at least 50 billion won.

Recent figures add urgency to the debate. Between January and March 2025, Korean crypto exchanges recorded ₩56.8 trillion ($40.8 billion) in outflows, with nearly half linked to dollar-based stablecoins.

The outflows have fuelled concerns about capital flight and foreign currency risk.

Lee’s policy seeks to build a domestic alternative, but critics argue that privately issued stablecoins pose macroeconomic risks by enabling money creation outside central bank control.

Analysts at the Korea Capital Market Institute warn that these instruments may effectively serve as shadow banks.

Regulatory crackdown targets unlicensed exchanges

At the same time, financial regulators are stepping up scrutiny.

The Financial Supervisory Service reported that 52.5% of suspicious crypto trading flagged between July and December 2023 involved investors in their 20s and 30s.

This demographic forms the core of the voter base targeted by crypto-friendly politicians.

Regulators have also invoked the Act on the Protection of Virtual Asset Users to propose criminal penalties for unfair trading practices.

Separately, South Korea recently compelled Google to block 17 unregistered foreign exchanges, reinforcing its tough stance on investor protection.

Along with the Digital Asset Basic Act, the government plans to release phase two of its crypto regulatory framework in the second half of 2025, expanding oversight and establishing a foundation for compliant digital finance.