As South Korea prepares for a pivotal presidential election on June 3, 2025, cryptocurrency policy has emerged as a headline issue. In a marked shift from the country’s traditionally cautious stance on digital assets, the leading candidates, Lee Jae-myung of the Democratic Party and Kim Moon-soo of the People Power Party—are promising sweeping reforms, including the legalisation of spot Bitcoin ETFs and the development of a stablecoin market backed by the Korean won.

This election follows a period of political upheaval, with former President Yoon Suk Yeol impeached and removed from office. The Constitutional Court upheld the decision on April 4, setting off a 60-day countdown to elect a new leader. As the race intensifies, the candidates’ crypto-forward agendas are resonating strongly with South Korea’s tech-savvy and financially active youth.

Legalising Bitcoin ETFs: Bridging Traditional Finance and Crypto

Both Lee and Kim have proposed legalising spot cryptocurrency exchange-traded funds (ETFs)—a move that would allow Korean investors to gain exposure to digital assets like Bitcoin via the traditional stock market. This represents a significant departure from the cautious stance previously maintained by regulators such as the Financial Services Commission.

The introduction of crypto ETFs could offer retail and institutional investors a safer and more regulated pathway to participate in the digital asset market. It also signals a maturing approach to crypto, integrating it more seamlessly into the country’s broader financial ecosystem.

Lee Jae-myung, in particular, aims to make crypto investment both easier and safer. His vision includes establishing a comprehensive monitoring system to track crypto activity and reduce trading costs. He has also suggested allowing South Korea’s National Pension Fund to allocate a portion of its holdings into crypto, provided the assets meet specific stability criteria.

Won-Backed Stablecoins: A Move Toward Monetary Sovereignty

A core element of Lee’s plan is the creation of a won-backed stablecoin market, aimed at curbing the outflow of capital into foreign dollar-pegged stablecoins like USDT and USDC. These U.S.-dollar-based coins have seen explosive growth, with a combined market capitalisation surpassing $200 billion in Q2 2025—up from $176 billion in late 2024.

Lee argues that a Korean stablecoin would strengthen national financial sovereignty and reduce dependency on foreign currencies. “We need to establish a won-backed stablecoin market to prevent national wealth from leaking overseas,” he noted during a campaign speech.

Currently, Korean crypto traders rely heavily on foreign stablecoins, contributing to an estimated 56 trillion won (approximately $40.8 billion) outflow in Q1 2025 alone. Lee’s proposal aims to redirect this value into a domestically controlled system.

A Crypto-Savvy Electorate and Industry Support

South Korea is home to an estimated 16 million crypto users, with the majority being younger investors. This demographic has responded positively to the reformist agendas, viewing them as long overdue steps toward legitimising and unlocking the potential of digital assets.

Industry leaders are also cautiously optimistic. Lee Keun-ju, head of the Korea Fintech Industry Association, supports the ETF proposals, saying they could create synergy between traditional finance and the crypto sector. However, he emphasises the importance of a clear regulatory framework to ensure responsible growth.

Concerns Over Inflation and Financial Stability

Not all reactions have been enthusiastic. Critics such as Shin Bo-sung, a researcher at the Korea Capital Market Institute, warn that widespread stablecoin adoption could trigger inflationary pressures. “We have to remember that stablecoins are like banks. They can create money out of nothing,” Shin cautioned, echoing global concerns about unregulated digital monetary systems.

Moreover, the Bank of Korea has reiterated its cautious approach to Bitcoin, highlighting the need for a balanced regulatory environment that promotes innovation without compromising financial stability.

As South Korea stands at a political crossroads, its crypto policy may soon undergo a historic transformation. With both leading candidates embracing pro-crypto platforms—including Bitcoin ETFs and the creation of a won-backed stablecoin—the nation could emerge as a global leader in digital asset integration. However, the path forward will require not just political will but also clear rules, public education, and robust financial safeguards to ensure sustainable growth in this rapidly evolving space.