"South Korea's version of Gensler" takes office; will the local encryption marketplace lose its appeal under strict regulation?

Author: MORBID-19

Compiled by: Tim, PANews

South Korea has welcomed its own version of Gary Gensler. The new head of the financial regulatory agency is named Lee Yi-hwan, and this name’s pun in Korean unexpectedly sparked comedy effects, as its pronunciation is very similar to “2 hundred million won” (about $140,000), roughly the amount of a down payment on some people’s homes.

During his nomination hearing for the Financial Services Commission (FSC) chairmanship, he faced intense scrutiny for holding shares in the “Single Person Single Chair” company Strategy, despite having previously criticized cryptocurrency for lacking real value. (Note: The “Single Person Single Chair” company refers to a company founded and led by someone playing a core behind-the-scenes technical support role. Here, it refers to Strategy, led by Michael Saylor.)

In a written response submitted to the National Policy Committee of Congress on the 31st of last month, Lee Yi-hwan stated: “Cryptographic assets have no intrinsic value, thus they differ from traditional financial products like deposits and securities,” and “due to high volatility, it is difficult for them to perform the basic functions of currency.”

Regarding policies related to encryption assets, he also said: “There are widespread concerns about allowing investments in cryptographic assets through retirement pensions or personal pensions aimed at ensuring stable income in old age,” and “While there is great anticipation for the launch of spot Bitcoin ETFs, concerns are also numerous,” showing a quite negative stance.

An industry insider commented: “Although they claim cryptographic assets have no intrinsic value, they invest in so-called ‘cryptocurrency-themed stocks,’ which seems somewhat ironic,” and “With the involvement of U.S. presidential family members and active legislative activity in Congress, a more forward-looking and constructive attitude is needed.” Lee Yi-hwan explained: “This investment is to observe how the market operates.”

Lee Yi-hwan inherently holds biases against cryptocurrencies. That’s okay.

However, he seems to fail to understand the nuances of cryptocurrencies. Instead, when creating more superficial regulatory rules, such biases could backfire.

Recently, he hinted at establishing a regulatory framework for listing and delisting cryptocurrencies.

Authorities also plan to expand public regulation to currently self-regulated cryptocurrency exchanges. Specifically, they intend to require exchanges to establish listing rules similar to stock markets, covering listing and delisting standards, trading suspensions and resumption, and disclosure requirements.

Regarding disclosures, officials said they will refer to stock market frameworks to develop measures for digital asset issuance, initial disclosures, and ongoing disclosures of already listed assets.

Financial Committee Chairman Lee Yi-yuan stated: “We are in the final stages of coordination with relevant ministries and plan to submit this proposal to Congress within this year.”

Why I believe all of this is unworkable: users can go on-chain.

If Korean cryptocurrency exchanges cannot offer opportunities comparable to the past, users will turn to other platforms. Given that on-chain applications and infrastructure are now on par with centralized solutions, there are virtually no obstacles for demanding users. Plus, native crypto applications can offer more opportunities for returns and airdrops. It’s almost illogical to keep assets on exchanges now.

In the long run, most applications and users will shift on-chain because jurisdictions cannot keep pace with innovation and cannot create equivalent value in a neutral environment lacking legal constraints.

Can Upbit or Bithumb offer users a 10% return on deposits? No. Unless they ignore all legal restrictions.

Reading Lee Yi-hwan’s comments on cryptocurrencies, especially when he mentions that “cryptographic assets are unable to perform the basic functions of currency,” I can’t help but doubt his policy ideas.

Today, no one considers cryptocurrencies as “currency.” We are at a stage where we discuss internet capital markets, speculation as a service, and hyper-financialization before the end of late capitalism, which has been exacerbated by rapid AI development widening the wealth gap. This society is destined to collapse.

Lee Yi-hwan’s attitude toward cryptocurrencies is almost like revisionist history of World War II. He attempts to redefine the essence and operation of cryptocurrencies based on flawed assumptions, which is why he proposes “establishing stock market-like listing rules.”

If the regulatory measures he proposes are actually implemented, the Korean market will effectively lose its attractiveness. Project teams are willing to hire locals and invest in Korea precisely because they understand the value of listing on Korean exchanges.

When we start implementing regulation based on outdated ideas, we will ultimately achieve nothing.

I believe Lee Yi-hwan’s worldview is rooted in protectionist thinking, originating from the economic turmoil of the late 1990s. During the 1997 Asian financial crisis, he was in his thirties.

But everything is changing. Korea has evolved, and we need to adapt more quickly. Korea is no longer an emerging country striving to catch up; we are now an economic powerhouse with a solid consumer base and high per capita GDP, no longer relying on producing toasters and wig products to make our mark.

With an aging population, we are gradually losing advantages in manufacturing. We must shift our national business model toward the upstream of the value chain, and this is precisely our great opportunity.