Author: Yuan Biao
01 Introduction
After seven years, the South Korean government announced the lifting of its previous ban. Crypto-related companies will once again be allowed to apply for venture capital funding. This will undoubtedly have a significant impact on the development of infrastructure in South Korea's crypto-asset sector.
We have one person to thank for lifting the ban: South Korean President Lee Jae-myung. In addition to this lifting of the ban on crypto-asset investment, it was also President Lee Jae-myung who led the South Korean people in lifting the absurd martial law in December of last year. Ten months later, looking back on the political farce that night in front of Gwanghwamun in Seoul, no one could have imagined that it would later give rise to the world's most radical cryptocurrency policy, the Digital Asset Basic Act. To a certain extent, without the martial law that night, there would be no President Lee Jae-myung, and without President Lee Jae-myung, there would be no lifting of the ban on VC applications from crypto companies. What impact will the newly promulgated Digital Asset Basic Act have on the Korean financial sector? What lessons can it learn from for the Chinese government's policy decisions on the crypto asset sector? Before delving into these two questions, we need to first understand the current state of crypto-asset development in South Korea. According to the International Monetary Fund (IMF), South Korea is the world's 13th-largest economy. Its nominal GDP in 2025 was estimated at approximately $1.79 trillion, ranking fourth in Asia, behind only China, Japan, and India. However, public awareness and participation in crypto-asset investment far surpass those of China, Japan, and India. Currently, the number of South Koreans holding cryptocurrency accounts has reached 16 million, surpassing the number of domestic stock investors for the first time. Keep in mind that South Korea's total population is only 50 million. This means that nearly one-third of the population is involved in cryptocurrency trading. There are many reasons for South Korea's widespread cryptocurrency speculation. I personally believe that, in addition to South Korea's technological maturity in the crypto space, it's largely due to changes in its social structure in recent years. Unemployment, an aging population, and population growth have become chronic issues plaguing this society. Traditional investments like funds and stocks offer meager returns, real estate is unaffordable, and with negative population growth, the long-term sustainability of the national pension system is questionable. Society as a whole has become relatively rigid, leaving few other avenues for wealth creation. Consequently, cryptocurrency speculation has become a necessity for South Korean investors. Comparing the Current Situation in China Compared to the current state of South Korea's social structure, how does China fare? leaf="">From the perspective of population structure, although South Korea has entered a super-aged society, China is also in the stage of a deeply aging society. Especially after several years of epidemic prevention and control, the sustainability of the national pension system will face greater challenges. In addition, compared with the deposit interest rates of China and South Korea in recent years, South Korea's time deposit interest rate is slightly higher than China's RMB time deposit interest rate. In 2024, according to the personal deposit listing interest rate released by the Bank of China on October 1, 2024, the Korean won's 1-month, 3-month, 6-month, and 12-month time deposit interest rates were 2.00%, 2.20%, 2.30%, and 2.40% respectively, while the RMB time deposit interest rates for the same period were 1.00%, 1.05%, 1.10%, and 1.20% respectively. South Korea's time deposit interest rate is significantly higher than China's. Although there is no comprehensive official overall data for this year, according to the information from the Dark Horse Number, South Korea's annual interest rate for time deposits in 2025 will be about 1.2%. Referring to the situation in 2024, it is expected that South Korea's time deposit interest rate may still be higher than China's RMB time deposit interest rate.
05 Impact of the Enactment of the Bill
Against this backdrop, South Korean investors, especially those between the ages of 30 and 50, have long viewed crypto assets as essential financial infrastructure. The Lee Jae-myung government has also taken advantage of the situation and adopted a relaxed policy towards cryptocurrencies. The author believes that the Chinese government's relaxation of cryptocurrency trading is just around the corner. So, in deciding whether cryptocurrency transactions can legally occur in China, China and South Korea face the same problem - concerns about speculation, money laundering, and capital outflow.
The fundamental purpose of the cryptocurrency agenda formulated by the South Korean government this time is to prevent South Korean assets from flowing abroad through dollar-denominated digital assets such as USDT or USDC. In the first quarter of this year, South Korean cryptocurrency exchanges transferred more than 60 billion US dollars in digital assets overseas, of which 47.3% flowed out through stablecoins. The "Digital Asset Basic Law" implemented this time has established a regulatory framework for South Korean companies to issue stablecoins pegged to the Korean won. At the same time, it has also greatly lowered the threshold for entering the stablecoin market.
So can the promotion of the Korean won stablecoin really prevent capital outflow?
06 Implications for China
Based on concerns about capital outflow and foreign exchange controls, the Chinese government has long maintained a negative attitude towards crypto assets and virtual assets. In particular, on September 15, 2021, the People's Bank of China and ten other ministries and commissions jointly issued the "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Transaction Speculation." It almost completely denied the legality of crypto asset transactions. However, through observation and research in recent years, the Chinese government's attitude has also subtly changed, especially at this year's Shanghai Cooperation Organization Tianjin Summit, which included stablecoins and digital currency cooperation in the discussion agenda. However, it does not mean that individuals are allowed to participate in digital currency investment at will, but rather exploring the application of related technologies within a compliance framework.
The effectiveness of the cryptocurrency policy strategy launched by the Lee Jae-myung administration will have a significant impact globally, especially on other Asian economies, including China. Coordinating both domestic and international situations is a fundamental experience of the Communist Party of China in governing the country. We have reason to believe that China's policy exploration in the field of crypto assets will always be based on the goal of maintaining national financial security and promoting high-quality economic development, and will forge a path that suits its national conditions.