South Korea and crypto. With China to its west and Japan to its east, South Korea is surrounded by economic giants, but nonetheless remains a pivotal influence on the global cryptocurrency markets — for reasons that are not immediately apparent to most external observers
Just as the industrial revolution centred on the cities of Northern England, and the digital revolution on the shores of Silicon Valley, blockchain development is beginning to concentrate in certain areas. One of these places is South Korea, where authorities have recently announced plans for “Crypto Beach” a major blockchain centre styled after Switzerland’s Crypto Valley. This development will be a focal point for a country that already has an outsized influence on the global cryptocurrency economy.
Sitting behind only Japan and the USA, South Korea is the world's third largest cryptocurrency market, and a staggering ~31% of the country's working population have invested in Bitcoin and other cryptocurrencies—bringing the blockchain far closer to the mainstream than most countries have managed.
A crypto society
Given it is a high-tech society that is well-adapted to new technology, such high rates of adoption might come as no surprise - but there is more to South Korea's crypto story than meets the eye. Despite having the 11th largest economy in the world, with high-tech products exported globally, Korean society faces certain social issues that have greatly increased the appeal of crypto.
High youth unemployment is one factor, which has hovered around 10 percent for the past few years, along with another 40% of youth that are thought to be underemployed—lacking enough hours of work to sustain independence. Even those in full-time work are still likely to find themselves priced out of the housing market, especially in Seoul where house prices have been found to be more expensive than both London and Los Angeles.
Combine these economic difficulties with the fastest internet speeds in the world, the highest percentage of smartphone ownership, and a national ban on gambling, and we have the perfect storm of opportunity for crypto.
On the global stage
When the China ban hit the markets in late August 2017, a vacuum opened up, ready to suck in the wealth generated by the yuan-bitcoin exchange markets, which are thought to have accounted for up to 80% of global volume. This gave neighbouring countries like South Korea, along with Japan and Hong Kong, the opportunity to occupy a more prominent position on the international scene.
While Japan is often dubbed as the most crypto-friendly of nations, recent events have drawn a shadow over the country—with authorities attempting to rein in the market, placing bans on privacy coins, and introducing strict auditing requirements for Japanese exchanges.
South Korea however, is pushing forward, and after flirting with the idea of a blanket ban, has adopted an arguably more progressive stance—announcing intentions to legalise ICOs in the country, and apply specific regulations to this type of fundraising.
The importance of appropriate regulation is clearly not underestimated by the Korean authorities, who after a foreboding statementfrom the Prime Minister, have introduced KYC regulations on exchanges that prevent foreigners and minors from registering in a bid to tackle money-laundering and “overheating” in the market.
This recognises the wave of desperation that hit the country following the market downturn, which caused not only a drop in trading volume in the country, but a rise in cases of a psychological malady termed the ‘bitcoin blues’, which is induced as dreams of prosperity are dashed by unpredictable markets.
Adoption
While trading volumes may have plummeted even further than the global market this year, South Korea is still arguably ahead of the curve when it comes to adoption. In a recent landmark case, a top South Korean court officially recognised cryptocurrency as an “asset with measurable value”, paving the way for future adoption.
Bithumb, South Korea’s biggest cryptocurrency exchange, have recently made another move aimed to spread the use of cryptocurrency throughout the mainstream economy. Their partnership with Korea Pay aims to spread crypto payments to over 8,000 merchants across the country by the end of the year.
And which cryptocurrency will they be spending? While the most famous project to come out of Korea is ICON (ICX), dubbed South Korea's 'national blockchain', this is unlikely to be the chosen medium of exchange. Trading volumes on Bithumb show that the most popular cryptocurrencies in the country mirror those in the West, with Bitcoin, Ripple and EOS ruling the roost. ICON also has a lot to prove as it moved away from being an ERC 20 token to its own mainet on June 20th, at a time when the marketplace is particularly sensitive to mainet transition issues given the problems with EOS.
However adoption progresses, events on the peninsular are likely to continue to have an outsized impact in the cryptoworld, as demonstrated most recently by the hacks of Korean exchanges Coinrail, which coincided with Bitcoin plummeting over 10% on June the 10th, quickly followed by a Bithumb on June 20th which saw BTC down 2.2% in 30 minutes@BPI
