As cryptocurrencies rose near the end of 2020, investors paid close attention to their performance in a few important markets. One of them is South Korea. The South Korean National Assembly enacted new laws in March 2020 that prepared the path for the regulation and licensing of cryptocurrencies and cryptocurrency exchanges.
Even in the middle of the COVID-19 outbreak, this step was made in acknowledgement of the exponentially expanding cryptocurrency ecosystem. The regulation was created to monitor a new sector and build anti-money laundering procedures.
- Cryptocurrencies are attractive investments among South Korea’s young people, who view them as a means of achieving affluence in the face of chronically high unemployment.
- South Korea has a long history of being an early user of new technology, and the culture encourages individuals to embrace new technical advancements and possibilities.
- Cryptocurrencies are stateless assets that appeal to South Korean investors afraid about the political situation and the North Korean menace.
South Korean investors have shown a strong interest in investing in digital assets and cryptocurrency marketplaces. According to survey data from 2021, 40.4% of 1,885 employees asked said they have invested in bitcoin. Surprisingly, 49.8% of South Korean employees aged 30 to 39 stated they have invested in cryptocurrency. Workers in their twenties came in second, accounting for around 37.1%.
This information sheds light on what seems to be South Korean investor adoption of blockchain and cryptocurrency. Accepting an optimistic attitude fuelled the appeal of investing in what many South Koreans saw as the future of finance.
However, the enthusiasm shared by South Korean digital asset investors has not gone unnoticed—it has drawn the attention of both criminals and authorities. As a consequence, South Korea is in the middle of a cryptocurrency crackdown aimed at improving exchange transparency, reducing illicit activity such as money laundering, and providing a layer of regulatory protection for cryptocurrency investors.
What Is the Allure of Cryptocurrencies for South Korea?
Several media stories and studies have examined South Koreans’ fondness for cryptocurrency and proposed hypotheses for their appeal. These theories may be grouped into three broad categories.
The primary reason for the popularity of cryptocurrencies is the country’s current economic difficulties. Despite being a reasonably big and successful economy, South Korea has a young unemployment issue. In 2020, the unemployment rate fluctuated from 7.5% to 11%, with a similar trend continuing into 2021. In the months of February, March, and April 2021, the young unemployment rate hit 10%. In May, the unemployment rate fell to 9.3%, and in June, it fell even more to 8.8%.
The government introduced a scheme to encourage small and medium-sized businesses to recruit youthful people. However, after the 2017 Bitcoin crash, cryptocurrencies emerged as a feasible path to financial stability in 2018 for young South Koreans living in a hierarchical culture with high living expenses and a highly competitive labor market.
“For young Koreans, bitcoin seems to be a rare opportunity at riches,” according to an article in the online journal The Verge. According to the same story, a 20-something writer believes that bitcoin investments are also a way for a mainly homogeneous and well-educated workforce to differentiate themselves from peers.
Another factor for cryptocurrency popularity is familiarity with micropayment transactions. South Koreans have a long history of being early adopters of technology innovation, whether it be social media or video games. It also offers the best Internet speeds in the world and a well-developed telecommunications backbone to support mobile payment solutions. Japan, another prominent bitcoin trading country, has a similar situation.
A thriving gaming sector has accustomed South Koreans to electronic micropayments, a notion that has yet to catch on in the West. Back in 2001, when online casual gaming was primarily free, Hangame, a Korean gaming firm, made $30,000 per day on micropayments of 50 cents apiece. By the end of the year, the same firm was making $80,000 per day and had reached $93 million in sales for the year.
Businesses and illegal markets have sprung up around its games. While cryptocurrency-related firms have yet to experience comparable income, they may be on the verge of doing so now that the South Korean government is putting in place the necessary rules.
The third reason for cryptocurrency appeal is political unpredictability. North Korea, South Korea’s neighbor, is classified as a “state of concern.” North Korea has made tremendous progress in developing nuclear weapons, which it argues is required to protect itself against a hypothetical US invasion. The country debuted a submarine-launched ballistic missile touted as “the world’s most powerful weapon” in early 2021. This revelation was made at a parade led by North Korean leader Kim Jong-un, only days before Joe Biden’s inauguration as US president.
Bitcoin appeals to investors who are skeptical about North Korea’s objectives since it is not tied to any state.
The Bottom Line
South Korean investors are drawn to cryptocurrencies because of political uncertainties, experience with micropayment systems, and economic concerns. The nation has always been a forerunner in the adoption of crucial world-changing technology. It is possible that the nation may once again set the standard by introducing cryptocurrencies into regular trade.
Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is very dangerous and speculative, and this article is not a suggestion by Investopedia or the author to do so. Because every person’s circumstance is different, a knowledgeable specialist should always be contacted before making any financial choices. Investopedia makes no guarantees or warranties about the accuracy or timeliness of the information provided on this site. The author holds a minor quantity of bitcoin as of the day this article was published.
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