The South Korean won has plunged to its lowest value against the U.S. dollar since 2022, reflecting widespread market instability following President Yoon Suk Yeol’s controversial declaration of martial law. The fallout has extended beyond traditional markets, with Bitcoin and other cryptocurrencies experiencing sharp declines on Korean exchanges.
Political Turmoil and Martial Law
President Yoon justified the imposition of martial law as a necessary measure to protect the nation from what he described as anti-state forces and North Korean threats. However, the move has drawn intense criticism both domestically and internationally, raising concerns about its impact on South Korea’s democratic governance and economic stability.
The South Korean parliament quickly moved to invalidate the declaration, with lawmakers overwhelmingly voting against it. Tensions escalated further when reports surfaced of military personnel attempting to enter the parliamentary building to enforce martial law. This clash between the presidency and the legislature has heightened uncertainty in the country.
Economic Impact: Won Declines and Market Volatility
The declaration has caused significant turmoil in South Korea’s financial markets. The won fell to 1,420 won per U.S. dollar, marking its weakest level since 2022. This instability has reverberated across global markets, with the euro recovering slightly amid broader financial market volatility.
In the crypto market, the uncertainty has led to sharp corrections. Bitcoin, which recently reached an all-time high of $99,000, dropped to around $95,000. Other cryptocurrencies like XRP also saw double-digit declines as market sentiment soured. Nigel Green, CEO of deVere Group, noted that such political uncertainty often drives investors toward decentralized currencies as alternatives to traditional financial systems.
Implications for South Korea’s Financial Sector
The political chaos comes at a challenging time for South Korea’s financial sector, which has been grappling with strict regulations and allegations of market manipulation. Local securities firms recently resumed CFD trading under tighter rules, including a higher minimum balance requirement for individual investors. This stricter regulatory framework was introduced following allegations of stock manipulation earlier this year.
Companies such as Meritz Securities Korea, Kyobo Securities, Eugene Investment, and Yuanta Securities have resumed operations under these new regulations. However, the current political instability could disrupt progress in the sector, particularly for forex and CFD trading.
Broader Economic and Democratic Concerns
President Yoon’s criticisms of the opposition Democratic Party of Korea, accusing them of undermining national governance, have further polarized the political landscape. The imposition of martial law has raised alarm about the erosion of democratic principles in South Korea, adding to investor concerns about the nation’s economic direction.
As South Korea navigates this crisis, the long-term implications for its financial markets, democratic governance, and global standing remain uncertain. The response from both domestic and international actors will play a critical role in shaping the country’s future trajectory.
