South Korea’s efforts to establish a comprehensive regulatory framework for cryptocurrencies have stalled amid political upheaval following the recent declaration of martial law and ongoing impeachment proceedings against President Yoon Suk Yeol, according to officials and local media.
After the martial law crisis, the National Assembly, which was preparing to vote on various crypto-related bills, reportedly postponed all discussions related to the regulation of virtual assets until at least the first half of 2025. anonymous official of the National Assembly cited by Chosun newspaper said the measures aimed to clarify policies on initial coin offerings (ICOs), real-name accounts for cryptocurrency trading, allowing local companies to hold digital assets on their balance sheets, Bitcoin spot exchange-traded funds (ETFs) and securities token offerings. (STO) have all been effectively “buried” due to the impeachment crisis.
“Since martial law has received all the attention of the National Assembly, it is difficult to say, but we should take care of it first, although there are many bills related to virtual assets ” the official said in Chosun. The source said the public should expect “an indefinite postponement” until the political situation stabilizes. Before the unrest, lawmakers were expected to take significant steps to clarify crypto rules and potentially bring South Korea in line with jurisdictions like the United States and Hong Kong, which are fast-tracking their own frameworks.
Martial law was unexpectedly declared by President Yoon during a televised speech on December 3, a move that immediately triggered political and economic uncertainty. He accused the opposition of sympathizing with North Korea and placed the country’s legislative activities, protests and media under military surveillance. Although the National Assembly later rescinded the order and it was withdrawn within hours, the lingering fallout has forced lawmakers to focus their attention on impeachment measures and the upcoming budget, leaving the crypto program in limbo.
One of the few crypto-related measures to narrowly escape this legislation The freeze was the postponement of a planned tax on cryptocurrency profits. On Dec. 10, just before the political upheaval, the National Assembly voted to postpone until 2027 the imposition of a 22 percent tax on earnings above 2.5 million won (about $1,750). entered into force on January 1, 2025.
The upheaval also shook local cryptocurrency markets. On December 3, Bitcoin (BTC) prices plunged on Upbit, South Korea’s largest crypto exchange. Within 30 minutes of Yoon’s martial law announcement, Bitcoin reportedly fell as much as 30%, from 88,266,000 won ($61,600) to $61,600 before recovering. The volatility has added to industry fears that current political instability could erode investor confidence and push traders to more favorable overseas markets.
In response to the crisis, the Financial Services Commission (FSC)South Korea’s top financial regulator, has opted to postpone the rollout of finalized guidelines for corporate crypto accounts. Even as the FSC prepared to implement these rules later this month, officials said the focus has now shifted to traditional financial sectors – stocks, bonds, short-term funds and foreign currencies – in the meantime. a more stable political environment.
Market participants have long criticized South Korea’s patchwork of crypto rules because they leave individuals and businesses without clear guidelines and protections. With this latest delay, observers warn that the country risks falling behind its global peers at a time when major jurisdictions are implementing robust regulations on digital assets.
Industry insiders and policy experts note that postponing these critical crypto reforms indefinitely could prompt domestic blockchain companies to seek more accommodating regulatory climates abroad. Without a timely resumption of the debate, they say, South Korea’s ambitions to become a competitive hub for digital finance and innovation remain uncertain.
