Maybe it’s the language barrier, or the walls authorities have set up to prevent money from leaving the country. But whatever it is, South Korea has built its own unique corner of the cryptoverse that’s unlike anywhere else on the planet.
Doo Wan Nam, a MakerDAO delegate who co-founded the research and advisory firm StableNode, laughs as he describes how crazy the intense speculation and crypto gambling can get in South Korea. He says it’s a country where the price of stablecoins like Dai or USD Coin can sometimes trade sky-high because if the price starts to rise a little above the $1 peg for some reason, speculators will jump in on the momentum trade.
“They sometimes trade for $20 because they don’t know it’s a stablecoin,” he explains. “They go, ‘You know, it was trading at $10, I bought it because it was pumping… I don’t know, I didn’t read, I just bought.’”
“So, I think that kind of tells you whether people knew what Terra was.”
The spectacular $60-billion implosion of the Terra ecosystem, headed up by the charismatic but ultimately deluded Korean developer Do Kwon, casts a pall over the entire ecosystem.
Terra is also instructive about some of the unique characteristics of the crypto culture in Korea, which places less emphasis on decentralization and puts more trust in project leaders like Kwon.
Crypto is huge in this country obsessed with the latest and greatest technology. The capital city Seoul is a futuristic metropolis with massive high-res screens and blistering fast internet everywhere. One in three people in the country owns cryptocurrency, and the government has unveiled an ambitious plan to transform it into the fifth-most metaverse-friendly country in the world.
South Korea technology
While English is taught in schools, few speak the language at a conversational level. This is true of many countries of course but helps explain why many Koreans aren’t plugged into the same information sources as crypto fans in the United States. Forget western social media and tech giants such as Reddit, Google, Twitter and Facebook — Google Maps barely works in the country and good luck getting an Uber.
Instead, South Koreans access the internet, chat, search, order food and call for rides using local giants Kakao and Naver.
“More than 90% of Koreans are using (social media app) KakaoTalk every day,” explains Sangmin Seo, who prefers to go by Sam. He’s the representative director of the Klatyn Foundation, Kakao’s blockchain and metaverse offshoot. “Naver is the most dominant search engine in South Korea. Google’s share is about 10%–20% and 70%–80% of the market share for search engines is Naver.”
Founded in 2011, Kakao is now the 15th-largest company in a country that’s dominated by around 40 mega-corporations. Samsung, LG, Hyundai and SK together account for half the local stock market’s value, while Samsung produces one-fifth of the country’s exports alone.
Zerocap analyst Nathan Lenga has researched the South Korean ecosystem in detail and explains there’s a whole other crypto world bubbling in the country. He cites blockchain-based video game and Roblox competitor Zepetto.
“People haven’t really heard about it, but it has 20 million users (a month), which is mindblowing,” he says.
“There’s this whole other side of crypto that we just don’t hear about that’s based on Asian culture. And that’s all originating in South Korea, and that’s why they’re such adopters — because they have their own versions.”
2017: South Korean crypto news
Seonik Jeon, CEO of Financial News and founder of Factblock, says that prior to 2017, the only time South Korea made international news was when North Korea was firing missiles.
“However, as the blockchain market began in Korea, around 2017 and 2018, the amount of searching for blockchain and Korea together increased significantly,” he explains.
Observers were fascinated by the speculative cryptomania that saw South Korea become the world’s third-largest crypto market in 2017. Bitcoin sometimes traded up to 20% higher in the country (also known as the famous “Kimchi premium”) due to capital controls introduced after the 2007–2008 global financial crisis to stop money from leaving the country.
Many tried and failed to exploit this mouth-watering arbitrage opportunity, including crypto’s current main character Sam Bankman-Fried — but a handful succeeded.
Cryptocurrency and gambling
Korea’s relationship with crypto is tied up in its complicated relationship with gambling, which is mostly outlawed for locals (except lotteries and horse racing). A study from the Korean Center on Gambling Problems suggests the average Korean is two to three times more likely to suffer from gambling addiction than other nationalities, and gambling is seen in a very negative light.
“Gambling itself is illegal in Korea, so a lot of people with gambling or a speculative [nature] then tend to go into stocks or crypto,” says Nam. “Crypto is very fast, high risk, high reward.”
Nam got into the space during the initial coin offering boom of 2017 after finishing his military service and joining a blockchain company.
“It was quite crazy. In Korea, it was very, very, highly speculative. Like, there were people literally — especially middle-aged or the elderly, who didn’t know much about blockchain — they just had money, and they go to different events and say, ‘I want to invest; how can I invest?’”
South Korean authorities banned ICOs toward the end of 2017, and news reports at the time claiming it was mulling a complete ban on crypto sent Bitcoin’s price plunging in January 2018 from a record high in December 2017.
Crypto bull run
The complete ban never happened, though, and there was a huge surge in adoption in 2021 due to skyrocketing prices that put the ICO boom to shame. According to Korea’s Financial Services Commision (FSC), at the beginning of 2021, just 1.9 million citizens owned cryptocurrency. By the end of the year, that number had grown to 15.25 million citizens.
That means one in three citizens now owns crypto, and the FSC put the country’s digital asset market cap at 55 trillion won (currently $40,719,445,990), making it the seventh-largest country in the world for crypto ownership by market capitalization. Lenga attributes the surge in adoption to the 2021 bull run and the successful presidential campaign of Yoon Suk-yeol, which was strongly pro-crypto and even released a nonfungible token collection for supporters. Yoon took office in May this year.
Jeon, however, believes that tech-loving millennials are behind the surge.
“I believe the popularity of crypto in Korea is largely due to the younger generation’s curiosity and willingness to try new technologies,” he explains.