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-backed stablecoins and leveraged trading, with digital asset taxation about to be implemented. Despite strict regulation, the demand for leveraged trading is strong, and trading volume is expected to increase significantly. Government top-level support for crypto is driving the development of spot leverage systems, but derivatives remain limited. Play-to-Earn and Web3 game regulation remains stringent, industry trust is damaged, and major companies are turning overseas. Upbit and Bithumb have become key targets for overseas projects, and leverage opening will trigger a new round of market competition.
Following is the original content (slightly edited for readability):
Korea's leverage wave is about to hit, with the country at a critical stage of power transition, and the new government is attempting some quite radical experimental ideas in cryptocurrency.
The two most likely topics to be implemented are:
- Korean won-backed stablecoin
- Legalization of leveraged trading
The ruling party's congressman Min released a draft of the "Digital Asset Basic Law" on June 10, which includes proposals for the aforementioned stablecoin and leveraged trading.
Once the relevant policies are truly implemented, South Korea will comprehensively advance cryptocurrency taxation. Upbit and Bithumb are already promoting themselves to overseas projects as top exchanges, so if leveraged trading is opened up, it could trigger a second wave of trading volume in the Korean market.
Koreans and leverage are almost synonymous
Although it's an old trope, locals indeed like to call themselves the "leverage nation". Data confirms this - in South Korea, six out of the top ten stocks by trading volume are leveraged ETFs.
Looking at holdings data - on the list of overseas stocks Koreans most love to hold, TQQQ (a triple-leveraged Nasdaq ETF) ranks sixth. This preference for aggressive betting is not just an internet meme, but almost a national characteristic.
Because of this, even on Upbit, Bitcoin trading pairs usually don't make the top five, and on Bithumb they consistently rank fourth or fifth.
Currently, Upbit's 24-hour trading volume is $2 billion, and this is entirely spot trading. If leveraged trading is approved, trading volume could easily triple. After all, the trading volume between spot and contract markets typically differs by 3 to 4 times.
Why is the possibility of opening leverage greater this time?
In the past, many bills attempted to relax regulations or postpone crypto taxation, but the difference this time is that after this election, related actions are finally "visible".
The currently ruling Democratic Party has always supported digital asset taxation. However, the premise of taxation is a regulatory mechanism in place, so their strategy is to first promote legislation for "Korean won-denominated stablecoins" and relax restrictions on leveraged trading, thereby laying the groundwork for subsequent taxation.
The current president's new policy chief secretary, Kim Yong Bum, who previously operated the think tank Hashed Open Research under blockchain venture capital firm Hashed, has actively promoted stablecoin legislation and openly supported relaxing crypto industry regulations.
Might not be perpetual contracts, but the 'leverage nation' will be awakened
No one can confirm whether this bill will ultimately pass, but even if it does, South Korea's leveraged trading won't be in the perpetual contract form seen on Binance.
What's written in the draft is actually a spot leverage system based on a "lending model", without involving any derivatives or futures options - such content is completely absent from the draft. In other words, only collateralized leveraged trading can be expected.
Although the spot leverage system is complex and restrictive, leveraged products still dominate stock market trading volume in South Korea. This "taste" will likely continue in the crypto market. The supported leverage multiplier is expected to be between 3 and 10 times.
Once a token is included in the leverageable list, its trading volume will rapidly surge, with listing on Upbit being just the first step.
Combining the leverage system with a Korean won stablecoin will further amplify this effect.
P2E Still Stuck in Regulatory Gray Area
Even with these eye-catching reforms and a batch of pro-crypto officials joining the government, don't expect Play-to-Earn or broader Web3 game-related regulations to relax in the short term.
Whether progressive or conservative governments, they have long cracked down on "speculative" mechanisms in the gaming industry, with the core issue being gambling-like characteristics. Before crypto taxation is fully implemented, Play-to-Earn projects will continue to be shelved.
The Korean game industry has been declining for three consecutive years. The strong backlash from loot box mechanisms has severely damaged player trust, with major game manufacturers turning to overseas markets. They have almost no motivation to try P2E domestically. For instance, MSU (@ MaplestoryU), despite clear international popularity, has never held a Korean AMA event.
Overseas projects have already set Upbit and Bithumb as their ultimate listing targets. Various teams are flying to Korea and constantly holding offline meetups. Everyone knows that to successfully complete the listing process and gain support, Korean user recognition is essential.
Project teams are continuously launching various benefits and positive measures to attract Korean token holders. If leveraged trading opens on Upbit and Bithumb, competition for the Korean market will become more intense.
Once leveraged trading extends beyond Bitcoin to the Altcoin realm, we will enter the golden period of the "Upbit era".
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