Rival parties banking on cryptocurrency policy to win voters

Finance

Published: 20 Mar. 2024, 18:11

Rival parties banking on cryptocurrency policy to win voters

Bithumb customer center in Seocho District, southern Seoul on Feb. 13. [YONHAP]

The rival political parties are putting forth cryptocurrency policy pledges with only three weeks left until the general election as crypto investors, mostly aged between 20 to 50, emerge as a key voting group.

Cryptocurrency has come into the limelight with the price of bitcoin, the most valuable cryptocurrency in terms of market cap, surging to a record high as of late.

As of 4:30 p.m. Wednesday, bitcoin was trading at 92.1 million won ($68,654) on Upbit, Korea’s largest cryptocurrency exchange.

While the price came down from its recent all-time peak of 105 million won in Korea, the figure is still over 60 percent higher than the 57 million won at the beginning of the year.

The latest rally was partly attributed to an inflow of capital from U.S. bitcoin exchange-traded funds, or ETFs, which the country's Securities and Exchange Commission approved in January. Britain's financial regulator has also said that it will approve the creation of exchange-traded notes, or ETNs backed by cryptocurrency. The imminence of bitcoin “halving,” wherein the supply of the cryptocurrency halves every four years, is another driving factor.

Both the conservative People Power Party (PPP), aligned with the Yoon Suk Yeol administration, and the rival Democratic Party (DP) put forward promises to further institutionalize crypto-assets.

Their approaches, however, vary significantly.

In its set of policy pledges issued on Monday, the PPP promised to once again extend a tax deferral on crypto-assets set to expire next January. A 20-percent taxation rate on crypto-asset investment gains over 2.5 million won was initially slated for implementation in January 2022 but had been delayed twice so far.

Another plan involves additional legislation to further bolster crypto-asset investor protection, as the Act on the Protection of Virtual Asset Users is scheduled to take effect in July. The PPP also pledged to establish a committee dedicated to investor protections and industry monitoring as well as standard rules for regulatory filings by crypto exchanges.

Meanwhile, the liberal DP is proposing a more progressive policy for cryptocurrencies.

Its plan, announced in February, includes approving the issuance, listing and trading of cryptocurrency-backed ETFs. The DP promised to tax capital gains from crypto-asset investments as financial investment income at an increased deduction limit of 50 million won, up from the current 2.5 million won. The party also pledged to ban crypto trading by lawmakers while parliament is in session, following the departure of Rep. Kim Nam-kuk, who left the party after controversy surrounding his cryptocurrency transactions.

However, finer systemic details are yet to be refined. With President Yoon's recent pledge to scrap the planned capital gains tax on stock investment gains, which was scheduled to take effect in 2025, taxes on gains from crypto-asset investments may stoke complaints of unfair treatment.

“A basic system should be set up before actually taxing crypto-assets,” said Seok Byoung-hoon, an economics professor at Ewha Womans University, stressing that “a detailed guideline should be established to minimize any side effects that may occur during the institutionalization of crypto-assets, rather than outright banning them.”

BY KIM KI-HWAN, SHIN HA-NEE [shin.hanee@joongang.co.kr]