Regulators Clash with Retail Investors Over Crypto’s Future in South Korea

Lee Eok-won, the nominee to lead South Korea’s Financial Services Commission (FSC), has come under fire for his dismissive stance on digital assets. In his written testimony ahead of confirmation hearings, Lee described cryptocurrencies as lacking intrinsic value and criticized their extreme volatility as a barrier to functioning as money or a store of value [1]. His remarks have reignited debates between regulators and a growing base of retail investors who see digital assets as a viable investment class.

Lee’s comments align with the current regulatory framework, which treats digital assets as neither legal tender nor financial products [1]. He also warned against the inclusion of retirement and pension funds in the crypto sector, citing the risks of speculative trading and the vulnerability of such assets to market swings. However, he expressed openness to regulating stablecoins, suggesting that with appropriate safeguards, they could be accommodated within the existing financial system without stifling innovation.

The backlash has been swift and significant, with the country’s blockchain industry pushing back against what they see as an outdated and overly cautious perspective [1]. According to data from Xangle, a local crypto analytics firm, crypto adoption in South Korea has more than doubled since 2022, reaching over 16 million investors by early 2025—nearly 30% of the population. This represents a 60% growth in just over two years [1]. Trading volumes on local exchanges have at times exceeded those of the stock market, and total crypto holdings now surpass 102 trillion KRW ($70 billion) [1].

Industry observers argue that Lee’s skepticism fails to account for the evolving nature of digital assets. For example, platforms like Hyperliquid, Tron, and Ethena have demonstrated value creation through token buybacks and revenue streams, drawing comparisons to traditional corporate stock buybacks [1]. This trend challenges the notion that crypto lacks real-world economic value and raises questions about the long-term viability of a regulatory stance that views the sector as primarily speculative.

Despite the government’s growing regulatory scrutiny—such as restrictions on asset managers investing in crypto-linked stocks and bans on asset-backed lending services—retail investor interest continues to rise [1]. In August 2025, for example, South Korean investors sold over hundreds of millions of dollars’ worth of Tesla shares and redirected capital into crypto-related assets, including BitMINE, which has become the largest Ethereum holder [1]. At the same time, purchases of major U.S. tech stocks have declined significantly compared to earlier in the year [1].

The growing divide between regulatory caution and retail enthusiasm poses a challenge for South Korea’s new administration, led by President Lee Jae-myung [1]. Balancing the risks of speculative investment with the demand for innovation and financial inclusion in the digital asset space will be a key policy test. As the FSC prepares for confirmation hearings, the debate over the future of crypto regulation in South Korea is likely to intensify, with implications for both the industry and the broader financial market.

Source: [1] South Korean FSC head nominee faces backlash after ... (https://cryptoslate.com/south-korean-fsc-head-nominee-faces-backlash-after-denouncing-crypto/)