South Korea’s FSC chief nominee sparks backlash with anti-crypto remarks

Lee Eok-won, South Korea’s nominee for the Financial Services Commission (FSC) chief position, has sparked significant criticism from the cryptocurrency community after declaring that cryptocurrencies are worthless. His remarks were made in written responses ahead of his confirmation hearing.

In his responses, Lee stated that cryptocurrencies lack intrinsic value, unlike traditional financial products such as deposits and equities. He argued that the volatility of cryptocurrencies prevents them from fulfilling the core functions of currency, such as being a store of value or a medium of exchange.

This viewpoint aligns closely with the South Korean government’s longstanding position that virtual assets do not qualify as currencies or financial products due to their lack of intrinsic value.

Support for stablecoin regulation

Lee also voiced concerns about pension and retirement funds investing in cryptocurrency. He highlighted market volatility and speculation as risks for such institutional investments. This caution fits with the broader regulatory environment in South Korea, where concerns about crypto have led to calls for stricter oversight.

While Lee has been vocal in his skepticism toward cryptocurrencies, he did express support for stablecoin regulation. He promised to implement “sufficient supplementary measures” while fostering opportunities for innovation, particularly regarding local-currency-pegged stablecoins. Under the endorsement of President Lee Jae-myung, South Korea is already working on regulations for such assets.

Crypto industry criticism of Lee’s stance

Lee’s remarks have drawn sharp criticism, especially from the virtual asset industry, which views his position as outdated. Historically, arguments like Lee’s, claiming that cryptocurrencies lack intrinsic value, were common among figures such as Bank of England Governor Andrew Bailey and JPMorgan CEO Jamie Dimon between 2017-2021. However, these views are increasingly seen as misinformed, given the widespread adoption of cryptocurrencies.

An executive from Xangle, a blockchain data service provider, criticized Lee’s statement as arising from “ignorance and a lack of understanding.” The executive also pointed out that many crypto critics hold traditional stocks—like Apple—while questioning the value of crypto. He compared traditional payment infrastructure (like PayPal) to blockchain platforms like Hyperliquid, which has conducted $1.5 billion in token buybacks this year, similar to stock buybacks by companies like Apple and PayPal.

Growing crypto interest despite regulatory caution

Despite regulatory caution at the government level, South Korea’s retail investors are showing increasing interest in crypto. Data from Bloomberg reveals that South Korean investors sold a net $657 million of Tesla stock in August, marking the largest outflow since early 2023, while pivoting toward crypto investments. This shift indicates growing dissatisfaction with traditional assets, such as stocks, and a desire for higher-risk, higher-reward opportunities in the digital asset space.

In fact, Bitmine Immersion Technologies, a crypto-related investment firm, saw $253 million in net inflows in August, with retail investors seeking out crypto proxies. Meanwhile, retail purchases of U.S. big tech stocks dropped from an average of $1.68 billion (January-April) to $260 million in July, showing a marked shift towards digital assets.

South Korea’s regulatory future for crypto

It remains unclear whether the Lee Jae-myung administration will fully embrace the growing appetite for crypto among retail investors. As South Korea weighs its approach to cryptocurrency, the future of the sector in the country will depend on whether crypto reforms are introduced that align with the needs and demands of retail investors and innovators in the digital asset sector.