"The 'Korean version of Gensler' takes office, will the local crypto market lose its appeal under strict regulation?"

Author: MORBID-19, X

Compiled by: White55, Mars Finance

South Korea has welcomed its own version of Gary Gensler. The new head of the financial regulatory agency is named Lee Eui-hwan, and the phonetic pun of this name unexpectedly creates a comedic effect in Korean, as its pronunciation is very similar to “200 million won” (approximately $140,000), which is equivalent to the down payment amount for some people's home purchases.

During his confirmation hearing for the position of Chairman of the Financial Services Committee (FSC), he faced intense scrutiny for holding shares in the “One Person, One Chair” company Strategy, despite having criticized that cryptocurrencies have no intrinsic value. (Note: The “One Person, One Chair” company refers to a company founded and led by individuals who play a core behind-the-scenes technical support role. Here it refers to the Strategy company led by Michael Saylor.)

In the written defense materials submitted to the National Policy Committee of Congress on the 31st of last month, Li Yihuan stated: “Cryptographic assets have no intrinsic value, thus differing from traditional financial products such as deposits and securities,” and “due to their high volatility, it is difficult to fulfill the basic functions of money.”

Regarding policies related to crypto assets, he also stated: “There are widespread concerns about allowing investment in crypto assets through retirement pensions or individual pensions aimed at ensuring stable income during old age,” and “Although there is great anticipation for the launch of a spot Bitcoin ETF, there are also many concerns.” Li Yihuan expressed a rather negative stance.

An industry insider commented: “Despite claiming that crypto assets have no intrinsic value, investing in so-called 'crypto-themed stocks' seems somewhat ironic.” He added, “With the entry of presidential family members and the active legislative activities in Congress, a more forward-looking and constructive stance is needed.” Li Yihuan explained: “The purpose of this investment is to observe how the market operates.”

Li Yihuan has a natural bias against cryptocurrencies. That's okay.

But Li Yihuan seems to have not understood the subtleties of cryptocurrency, and instead, when more superficial control rules are formulated, this kind of bias may lead to counterproductive consequences.

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

The authorities also plan to expand the scope of public regulation to currently self-regulated cryptocurrency exchanges. Specifically, they intend to require exchanges to establish listing rules similar to those of stock markets, covering standards for listing and delisting, trading suspension and resumption, as well as disclosure requirements.

In terms of disclosure, the relevant person in charge stated that measures related to the issuance of digital assets, initial disclosure, and continuous disclosure of listed assets will be formulated with reference to the stock market framework.

The chairman of the Financial Committee, Li Yiyuan, stated: “We have entered the final stage of coordination with the relevant ministries and plan to submit this proposal to Congress within this year.”

Why I think this won't work: Users can go on-chain.

If South Korean cryptocurrency exchanges cannot provide the same opportunities as before, users will turn to other platforms. Given that on-chain applications and infrastructure are now on par with centralized solutions, there are virtually no barriers for users with high demand. Furthermore, since crypto-native applications can offer more opportunities in terms of yields and airdrops, it is almost illogical to keep assets on exchanges today.

In the long run, most applications and users will inevitably turn to on-chain, as jurisdictions struggle to keep up with the pace of innovation and cannot create equivalent value enhancement in a neutral environment lacking legal constraints.

Can Upbit or Bithumb provide users with a 10% return on deposits? No. Unless they ignore all the laws that bind them.

After reading Li Yihuan's comments on cryptocurrency, especially when he mentioned that “cryptocurrencies struggle to fulfill the basic functions of money,” I couldn't help but question his policy ideas.

Nowadays, no one views cryptocurrency as “money” anymore. We are in a stage where we discuss internet capital markets, speculation as a service, and the super-financialization before the apocalypse of late capitalism. The rapid development of artificial intelligence has exacerbated the wealth gap, and this society will ultimately collapse.

Li Yihuan's attitude towards cryptocurrencies is almost like a revisionist interpretation of World War II history. He attempts to redefine the essence and operation of cryptocurrencies based on his unfounded assumptions, which is why he proposes ideas such as “establishing listing rules similar to those of the stock market.”

If the proposed regulatory framework is actually implemented, the South Korean market will effectively lose its appeal. The reason why project teams are willing to hire locals and invest funds in South Korea is that they are well aware of the value of being listed on Korean exchanges.

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

I believe Li Yihuan's worldview is rooted in a protectionist ideology, which stems from the economic turmoil of the late 1990s. During the Asian financial crisis in 1997, he was in his 30s.

But everything is changing. South Korea has changed, and we need to adapt to the changes at a faster pace. South Korea is no longer an emerging nation striving to catch up; we are now an economic powerhouse with a solid consumer base and a high per capita GDP, no longer relying on the production of toasters and wig products to make our mark in the world.

As the population ages, we are gradually losing our competitive edge in the manufacturing sector. We must transform the country's business model upstream in the value chain, and this is our excellent opportunity.