Original title: Korea's leverage wave is coming
Original author: @impalementd
Original translation: gpt, BlockBeats
Editor's note: Currently, South Korea is promoting the legalization of Korean won stablecoins and leveraged trading, and digital asset taxation is about to be implemented. Despite strict supervision and strong demand for leveraged trading, trading volume is expected to increase significantly. The government's top leaders support encryption and promote the development of spot leverage systems, but derivatives are still restricted. Play-to-Earn and Web3 game supervision is still strict, industry trust is damaged, and major companies turn to overseas. Upbit and Bithumb have become the focus of overseas projects, and the opening of leverage will trigger a new round of competition in the market.
The following is the original content (for easier reading and understanding, the original content has been reorganized):
The leverage wave is coming to South Korea, which is in the midst of a transition of power, and the new administration is trying some pretty radical, experimental ideas when it comes to cryptocurrencies.
The two hot topics that are most likely to be implemented are:
- Stablecoin backed by the Korean won
- Legalizing leveraged trading
The ruling party’s lawmaker Min released a draft of the “Basic Law on Digital Assets” on June 10, which included the aforementioned proposals for stablecoins and leveraged trading.
Once the relevant policies are truly implemented, South Korea will fully promote the taxation of cryptocurrencies. Upbit and Bithumb have already promoted themselves as top exchanges to overseas projects, so if leveraged trading is liberalized, it may trigger a second round of trading volume explosion in the Korean market.
Koreans and leverage are almost synonymous
Although this is an old joke, the locals do like to call themselves the "leverage nation." The data also confirms this - in South Korea, six of the top ten stocks in terms of trading volume are leveraged ETFs.
Looking at the holdings data, the sixth most popular overseas stock held by Koreans is TQQQ (a triple-leveraged Nasdaq ETF). This preference for aggressive bets is not just an Internet meme, it has almost become a national character.
Because of this, even on Upbit, Bitcoin trading pairs usually fail to make it into the top five, and on Bithumb they are often ranked fourth or fifth.
Currently, Upbit’s 24-hour trading volume is $2 billion, and this is all spot trading. If leveraged trading is allowed, the trading volume may easily triple. After all, the trading volume of spot and contract markets usually differs by 3 to 4 times.
Why is it more likely that leverage will be released this time?
There have been many bills in the past attempting to relax regulations or postpone crypto taxation, but the difference is that after this election, the relevant actions are finally "visible."
The ruling Democratic Party has always supported taxation of digital assets. However, the premise of taxation is that the regulatory mechanism is in place, so their strategy is to first promote the legislation of "stable currency denominated in Korean won" and relax restrictions on leveraged transactions, thereby laying the foundation for subsequent taxation.
Kim Yong Bum, the current president’s new chief secretary for policy, was previously responsible for running Hashed Open Research, a think tank under blockchain venture capital firm Hashed. He has been actively promoting stablecoin legislation and publicly supports the relaxation of crypto industry regulations.
It may not be a perpetual contract, but the “leverage nation” will be awakened
No one is sure whether the bill will eventually pass, but even if it does, leveraged trading in South Korea won’t be the kind of perpetual contracts you see on Binance.
What is written in the draft is actually a spot leverage system based on the "lending model" and does not involve any derivatives or futures options - such content does not appear in the draft at all. In other words, we can only expect leveraged transactions supported by collateral.
Although the spot leverage system is cumbersome to operate and has many restrictions, leveraged products still dominate the trading volume of the stock market in South Korea. This "taste" is likely to continue in the crypto market. The leverage multiples that can be supported are expected to be between 3 and 10 times.
Once a token is included in the list of leveraged tokens, its trading volume will soar rapidly, and listing on Upbit will only be the first step.
Combining the leverage system with the Korean won stablecoin will further amplify this effect.
P2E is still stuck in the regulatory gray area
Even with these headline-grabbing reforms and a wave of pro-crypto officials joining the government, don’t expect Play-to-Earn or broader Web3 gaming-related regulation to relax any time soon.
Both progressive and conservative governments have cracked down on “speculation” in the gaming industry for years, with the core problem being its gambling-like characteristics. Until crypto taxation is fully implemented, the Play-to-Earn project will remain on hold.
The Korean gaming industry has been declining for three consecutive years. The backlash caused by the unboxing mechanism has seriously damaged the trust of players, and major game manufacturers have turned to overseas markets. They have little motivation to try P2E domestically. For example, MSU (@MaplestoryU) has never held a Korean AMA event despite its obvious popularity internationally.
Overseas projects have already regarded Upbit and Bithumb as their ultimate listing targets. Various teams have flown to South Korea and held offline gatherings. Everyone knows that in order to successfully pass the listing process and gain support, it is necessary to gain recognition from Korean users.
The project team has been continuously launching various benefits and favorable measures to attract Korean coin holders. If leveraged trading is opened on Upbit and Bithumb, the competition for the Korean market will be even more intense.
Once leveraged trading is not limited to Bitcoin but expands to the field of altcoins, we will usher in the golden age of the "Upbit era".
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