All of South Korea’s presidential candidates have announced crypto-friendly stances in a bid to win over young voters ahead of the election next month.

Real estate is the biggest issue on voters’ minds in South Korea now as young people under the age of 24 earn salaries of around KRW 2.6 million (US$2,176) a month, face expensive Seoul rent and have no hope of buying an apartment. Many of them have turned to stocks and crypto.

According to Edward Hong, head of platform at crypto venture capital firm Hashed, there are more than 5 million individual crypto accounts across the country’s top three crypto exchanges. Hong estimates that about 10% of this year’s voters are crypto investors.

Around 91% of South Koreans own a smartphone. Internet penetration is 96.5%. Gaming is popular, and the average person has some level of trading experience. Combining all that forms a population that is highly receptive to crypto assets, and a swath of Gen Z voters have emerged as a serious electoral force in the country.

Political calculations

Candidates have offered little so far in terms of concrete policies about regulation crypto, in contrast to their detailed pledges on fixing housing issues. They have, however, made statements about their support for the industry.

“They are incentivized to say more crypto-friendly statements or not say anything negative, as that might lose them votes from the young generation,” said Steve Lee, an investor at BlockTower Capital, a hedge fund focused on crypto asset and blockchain technology.

In September, the current administration proposed a 20% tax on crypto gains made in a one-year period over KRW 2.5 million (US$2,122), but had to walk that back after backlash from crypto investors.

While there have been drafts for blockchain-specific legislation that would require investor protection and disclosure rules, no law has been passed, and the lack of clarity is deterring potential institutional investors.

“There has been progress in 2021, but regulatory guidance on crypto investment still needs more clarity,” Lee said.

Jin Kang, head of legal at Hashed, said the lack of regulation is a “calculated risk” to make sure that the ruling party can attract voters with its proposal of a regulatory framework.

There are 14 crypto-related bills circulating at the moment. “Something has to happen after the presidential election,” Harold Kim, former director of Korea Blockchain Association, said.

Bringing companies back

Candidates have pledged to bring crypto companies back to South Korea. There is now a de facto ban on initial coin offerings (ICOs) as a result of a notice posted on the Financial Services Commission’s website in 2017, though it never made it into legislation or regulation.

After the notice, crypto-related companies moved to Singapore or other jurisdictions so that they could conduct business without regulatory uncertainty.

Kang said that rescinding the notice won’t be enough to attract companies to move back. He said only a “more comprehensive package” will get people to bring their crypto businesses back to South Korea, which might include tax incentives coupled with educational or job-related incentives and benefits for employing locals.

So far, more comprehensive policy packages have been issued only at the local government level. The city of Busan, for instance, has been designated as a regulation-free blockchain special zone, which allows projects to test technology and services.

Consumer protection

Recent headlines in South Korea have highlighted the issue of insufficient protection for crypto investors.

After gaming company WeMade announced that it would launch play-to-earn games, its stock price soared.

“This shows the level of NFT (non-fungible tokens) hype among retail investors, but also how listed companies or brand names drive hype,” Lee said.

Last month, after news spread that WeMade was selling off its WEMIX tokens in tranches, its token price fell sharply as the company faced allegations that it was enriching itself on the back of retail investors.

In its white paper, WeMade stated that 74% of its tokens would be used to support the growth of its ecosystem. It has said that its intention was for the token to become an in-game currency for at least 100 games.

At the present time, there is no clear standard for disclosure or any standard on how clear a company should be about its holdings. Chang Hyun-guk, WeMade’s CEO, has pledged to make transactions more transparent and compensate investors.

Many of South Korea’s largest entertainment and gaming companies have indicated their interest in the crypto sector, saying at annual and shareholder meetings that they will pursue NFTs or play-to-earn games.