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Key Takeaways:
South Korean political party’s interest in Bitcoin ETFs: The fact that a South Korean political party is relying on access to US Bitcoin ETFs for votes highlights the growing importance of cryptocurrencies in global politics.
Interconnection of global financial markets: The South Korean party’s interest in US Bitcoin ETFs underscores the interconnected nature of global financial markets.
Growing acceptance of cryptocurrencies: The reliance on Bitcoin ETF access for votes suggests a shifting attitude towards cryptocurrencies in mainstream politics.
A South Korean political party has taken an unprecedented step by staking its electoral fortunes on the availability of a Bitcoin exchange-traded fund (ETF) in the United States (US).
On April 5, 2024, Bloomberg announced that the opposition Democratic Party had vowed to remove restrictions on domestic and international ETFs directly holding crypto tokens, including US-based spot Bitcoin ETFs. The Democratic Party’s Hwanseok Choi cited the group’s manifesto and said “We’re going to allow the ETFs, whether domestic or overseas.”
President Yoon Suk Yeol’s People Power Party suggested delaying taxes on digital assets profits, scheduled to take effect in 2025, hoping to capitalise on crypto voters.
This manoeuvre, characterised by its fusion of international finance and domestic politics, underscores the growing influence of crypto in both spheres. According to government statistics, in the first half of 2023, nearly six million South Koreans traded crypto via registered exchanges. According to official disclosures, 7% of election candidates own digital assets.
The Significance of Bitcoin ETF Access
The push for a Bitcoin ETF holds significant implications for South Korea and the global crypto market. Access to such a financial instrument in the US market would mark a watershed moment, facilitating mainstream adoption and legitimising Bitcoin as an investable asset class.
For South Korea, a country known for its tech-savvy population and robust crypto trading scene, the availability of a Bitcoin ETF could further fuel enthusiasm and investment in digital assets. Data from Korea Securities Depository revealed that crypto users have invested over $200 million in shares of US-listed firm MicroStrategy. This led to some analysts labelling it as a leveraged Bitcoin ETF due to the company’s massive exposure to BTC.
Political Risk and Reward
South Koreans are bracing for tighter cryptocurrency regulations as local financial authorities plan to release new rules for token listings on centralised exchanges in the coming weeks. The decision to hinge its electoral prospects on the availability of a Bitcoin ETF is not without risks. While the move may resonate with a segment of the electorate, it exposes the party to criticism and scrutiny. Critics may question the wisdom of tying domestic policy objectives to developments in foreign financial markets, especially in a volatile and speculative asset class like crypto.
South Korea’s upcoming Virtual Asset Users Protection Act prohibits the use of undisclosed important information about crypto, market manipulation, and illegal trading. The outcome of the US Securities and Exchange Commission’s (SEC) deliberations on Bitcoin ETFs remains uncertain. The SEC has historically been cautious in approving such products, citing market manipulation, investor protection, and regulatory oversight concerns.
Navigating the Intersection of Finance and Politics
US Bitcoin ETF access as a cornerstone of its electoral strategy highlights the evolving dynamics at the intersection of finance and politics. Once relegated to the fringes of the financial world, crypto has emerged as a potent force that can shape political discourse and influence policy decisions. Local media reports suggest domestic exchanges will be prohibited from listing crypto assets affected by hacking incidents until their root causes are determined.
Additionally, foreign digital assets will be listed on domestic exchanges only on a white paper or technical manual available for local investors. As the global crypto market matures and integrates with traditional financial systems, policymakers and political actors must navigate this new terrain with caution and foresight. While the prospect of a Bitcoin ETF in the US holds promise for broader adoption and investment, it also presents challenges and uncertainties that cannot be ignored.