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Korea Herald
20-05-2025
- Business
- Korea Herald
Lee Jae-myung targets youth vote with push for crypto ETFs, won-backed stablecoins
With 15 million crypto investors nationwide, liberal front-runner aims to bridge digital finance, traditional markets As Korea's election nears, presidential hopefuls are ramping up their cryptocurrency policies, positioning digital assets as key to future economic growth that would support young people in building their wealth. With an estimated 15 million crypto investors nationwide, candidates are competing to secure this sizable, tech-savvy voting bloc through bold pledges to expand digital asset markets and deepen integration with the mainstream economy. Both Democratic Party of Korea presidential candidate Lee Jae-myung and People Power Party rival Kim Moon-soo have pledged to legalize and promote spot cryptocurrency exchange-traded funds, signaling a shift in the country's financial policy landscape. Crypto ETFs as bridge to mainstream finance At the heart of the candidates' platforms is a shared commitment to legalize spot crypto ETFs, which would allow digital assets such as Bitcoin to be listed on the country's stock markets. The presidential front-runner Lee has outlined plans to establish an integrated monitoring system and lower transaction costs, aiming to provide investors with a regulated, accessible entry into cryptocurrencies. Unlike cautious Korean regulators, Lee's campaign argues that including digital assets in diversified portfolios is crucial for effective hedging against their unique volatility, which differs from traditional assets such as stocks and bonds. Legislative proposals are also underway to amend the Capital Markets Act to recognize cryptocurrencies as eligible underlying assets, fueling optimism that the legalization of crypto ETFs could become a reality soon. Lee's campaign proposes to allow institutional investors, such as the National Pension Fund, to make direct investments in digital assets once their value stability criteria are met, potentially paving the way for large-scale, mainstream participation. Candidates' backing increases the likelihood of policy breakthroughs, and if approved, crypto ETFs would let retail investors gain digital asset exposure within regulated environments, without the complexities of direct crypto holdings. Lee Keun-ju, president of the Korea Fintech Industry Association, welcomes the moves to adopt spot crypto ETFs. 'A Bitcoin spot ETF is not simply a product. It can be the gateway to broadening the connection between the digital asset ecosystem and the capital market,' he said, adding that legal and infrastructure reforms will be essential to support this transition. Won-backed stablecoin for capital flow Lee Jae-myung's vision extends beyond immediate trading benefits. He has proposed creating a won-based stablecoin market, which he presents as a strategic tool to prevent capital flight. 'We need to establish a won-backed stablecoin market to prevent national wealth from leaking overseas,' he said during a recent policy discussion with YouTubers dealing with economic issues last week. Lee believes that a domestic stablecoin would help stabilize the financial system, avoid overreliance on foreign currencies and retain economic value within Korea. Currently, Korea prohibits the issuance of domestic stablecoins, which are digital assets pegged to the Korean won. Instead, only foreign stablecoins such as USDT and USDC are traded locally, raising concerns about capital outflows. Between January and March, Korean crypto exchanges saw 56.8 trillion won ($40.8 billion) in asset outflows, with nearly half tied to dollar-based stablecoins. However, concerns persist over the macroeconomic risks of granting stablecoins quasi-currency status. Shin Bo-sung, a senior researcher at the Korea Capital Market Institute, warned that allowing stablecoin issuance could inflate the overall money supply and create significant unintended consequences. 'It effectively hands the privilege of money creation to the private sector. We must not overlook the economic principles behind them. Stablecoins are essentially another form of banking, creating money out of nothing,' Shin said. The Democratic Party is scheduled to introduce the Digital Asset Basic Act this week, serving as the cornerstone of its cryptocurrency policy. This bill marks an initial step toward officially integrating digital assets into the legal framework, covering regulations on their legal status, issuance, circulation and listing. It is also expected to stipulate that stablecoin issuers must obtain approval from the Financial Services Commission and maintain reserves of at least 50 billion won.
Korea Herald
23-02-2025
- Business
- Korea Herald
Report warns of explosive debt increase, growth freeze
Fueled by the world's fastest aging population, South Korea's national debt is projected to surge sixfold to 7,000 trillion won ($4.87 trillion), while the country's productivity is expected to nearly stagnate by 2072. The National Assembly Budget Office detailed this grim outlook in its "Long-term Fiscal Outlook Report for 2025-2072," highlighting the significant impact of demographic shifts driven by a rapidly aging population and a declining workforce. The forecast is based on the assumption that existing laws and systems will remain unchanged. According to the report, by 2050, the national debt is expected to reach a level where the country's production will no longer be sufficient to cover it, with the debt-to-GDP ratio projected to surpass 100 percent. Currently at 48 percent, the ratio is forecast to surge to 173 percent by 2072, meaning the country's debt will be 1.73 times its annual economic output. The country's national debt is expected to increase nearly sixfold by 2072, rising from the current 1,270 trillion won to 7,300 trillion won. In the same period, the gross domestic product growth rate is projected to plummet to 0.3 percent by 2072, down from the anticipated 2.2 percent this year. The report highlights that increased spending driven by the world's fastest-aging population is a key factor in the explosive growth of national debt. "The total spending-to-GDP ratio is projected to rise as mandatory expenditures increase due to the growing number of public pension beneficiaries and escalating welfare costs from an aging population," the report stated, noting that this proportion is expected to grow from 25.5 percent in 2025 to 33.6 percent. This translates to an average annual spending growth rate of 1.6 percent over the next 47 years. In contrast, Korea's national income is anticipated to grow at only half that pace, averaging 0.8 percent per year until 2072. Last year, Korea became the world's fastest "super-aged society," transitioning from an "aged society" in just seven years, as the proportion of its population aged 65 or older increased from 14 percent to 20 percent. This proportion of the senior population is expected to rise further, reaching nearly half of the population — 47.7 percent — by 2072. The number of over-65 population is projected to grow from 10.51 million in 2025 to 17.27 million by 2072. In contrast, the economically productive population, aged 15 to 64, is projected to decline from 35.91 million to just 16.58 million during the same period. Such demographic change is set to undermine the financial stability of the country's social security programs, becoming a major driver of Korea's rising fiscal deficit. The largest of these programs is the National Pension Fund, which is projected to peak in reserves in 2039, before entering negative growth the following year, ultimately being depleted by 2057. Upon depletion, the fund's accumulated fiscal deficit could reach approximately 2,900 trillion won, or 60 percent of GDP, by 2072. The report underscored that slowing population decline is critical to curbing national debt. According to the report, the projected national debt-to-GDP ratio of 173 percent by 2072 is based on a "medium" population estimate of 36.22 million. If demographic trends improve and the population declines only to the "high" estimate of 42.82 million, the debt ratio could drop by 9.8 percentage points to 163.2 percent. Conversely, if the population shrinks to the "low" estimate of 30.17 million, the ratio could rise to 181.9 percent. Hope lies in a potential rebound in the birth rate: "Preliminary data suggests Korea's total fertility rate will rise to 0.75 in 2024, surpassing the government's projection (of 0.68) and marking the first increase in nine years since 2016. ... It is crucial to maintain at least a 'medium' level of population structure to prevent a rise in the national debt."
