According to data from The Block, as of October, the cumulative trading volume of cryptocurrency exchanges (CEX) has reached US$443.27 billion, while South Korea’s Upbit’s spot trading volume in October was US$51.88 billion, ranking second.
The rise of Upbit, which makes it the second largest CEX, highlights the strong demand in South Korea’s current crypto market. Despite the impact of the global economic downturn in 2022, the user scale and transaction volume of the Korean market are still showing an expansion trend.
So, how did South Korea’s encryption market develop, and what is its current specific development status?
The “Korean Dream” in “Kimchi Premium” When people mention South Korea, they may think of the prosperous entertainment industry, superb plastic surgery technology, or delicious kimchi. However, in addition to these well-known Korean labels, perhaps another label needs to be added, that is, "the country of currency speculation".
In South Korea, Bitcoin has always been very popular, especially during the peak of the bull market in 2017. Bitcoin can be said to be a household name in South Korea. From students to the elderly, from office workers to freelancers, Koreans are all trying to find market trading opportunities to find ways to get rich. So much so that there were buyers on Korean trading platforms willing to buy Bitcoin at a 50% premium. Coinmarketcap even removed South Korea’s price from the crypto market when local Bitcoin prices were 40% higher than on U.S. exchanges. This phenomenon later became known as the “Kimchi Premium.” However, in 2018, the South Korean government began to crack down on speculation, forcing the use of real-name bank accounts for cryptocurrency transactions, and comprehensively banned "Aisio" in the same year, and the kimchi premium disappeared.
While the pickle premium may have disappeared, the crypto hype fever continues.
In 2021, South Korea's total crypto trading volume reached nearly 20 billion US dollars, ranking fourth in the world, behind the United States, Japan and the United Kingdom.
In 2022, South Korea ranked third in terms of Bitcoin trading volume, behind the United States and Japan. In the first half of 2023, South Korea's digital asset market showed significant growth. According to a research report released by KOFIU on October 31, 2023, the encryption market value increased by approximately 46% compared with the first half of the year, with the total market value reaching 28.4 trillion won (approximately US$226 billion). ). So, why are Koreans so keen on speculating on currencies?
On the one hand, it is related to South Korea’s national conditions. The fast-paced life in South Korea has made South Korea more accepting of new technologies. Local support for the Web3 field, strong economy, and focus on technology and innovation are all contributing factors.
The Korean War from 1950 to 1953 made South Korea one of the poorest countries in the world, while by 2023 it was one of the richest. Led by family business groups (chaebols) and focusing on exports and capitalist development, South Korea achieved economic takeoff in just a few decades. This is the famous "Miracle on the Han River." This rapid development has also resulted in a fast-paced lifestyle where every second counts, food must be delivered quickly, trains arrive on time, and buildings are constructed within weeks. Whatever you do, do it quickly and efficiently, and getting rich is no exception. Therefore, Koreans advocate the value of "getting rich quickly, quickly" and a culture of speculation, and are eager to get rich quickly through speculation.
Before 2012, the Korean market mainly relied on innovation and labor surplus value to achieve economic growth. However, after 2012, economic growth slowed down from double-digit growth in 2000 to about 3%. It became difficult to get rich, and ordinary people had an upward path. Increasingly narrow, stringent real estate policies and high stock market thresholds have led to the only speculation for many Koreans being gambling. When crypto-assets emerged, Koreans felt that new gambling products had appeared and new opportunities to get rich had arrived.
South Korea, on the other hand, is a country that is keen to welcome cryptocurrencies. It once implemented relatively loose policies in the cryptocurrency market and is currently one of the most crypto-friendly countries.
However, the bankruptcy of South Korea's LUNA project in 2022 brought heavy losses to Korean investors. Not only did they not make much money, but they even shattered many people's "Korean dream" due to debt. At the same time, the LUNA crash also attracted great attention from the South Korean government, which began to tighten the regulation of encryption. In the first half of 2023, South Korean market statistics conducted transactions on approximately 622 cryptocurrencies, including market leaders such as Bitcoin, Ethereum, Ripple, and Dogecoin. During this period, a total of 169 new cryptocurrencies were listed, of which 115 faced suspension of trading due to project risks, investor protection and other reasons.
Koreans looking forward to getting rich overnight. Although the risks of encryption are huge, it still cannot stop Koreans’ enthusiasm for speculating on getting rich.
During the epidemic, many young Koreans even quit their jobs in large companies in order to speculate in currencies. They just wanted to give it a try and hope to change the trajectory of their lives. Statistics from crypto platform research reports show that in the first half of 2023, about 26% of Korean adults are involved in the cryptocurrency field, with the participation of women and younger generations increasing, and 25% of crypto investors in the past six months. Made their first crypto investment in 2018, and 38% of young crypto investors hope to become rich overnight through crypto assets.
So according to this narrative logic, the most active people in the DeFi field should be Koreans. However, after the kimchi premium, the "craze" of currency speculation still exists, but DeFi development has not improved at all.
This still has something to do with South Korea’s national conditions.
First, South Korea’s financial regulatory environment is relatively unstable, although financial regulators have taken some steps to regulate the cryptocurrency market, including DeFi, in the past. However, these policies have not been incorporated into legislation, and there is uncertainty in the policies. This uncertainty will hinder some DeFi projects and investors.
In addition, the Korean government has emphasized KYC (Know Your Customer) and AML (Anti-Money Laundering) requirements, which may have some impact on the anonymity and decentralized nature of DeFi platforms. These requirements increase the difficulty of promoting and developing DeFi projects in South Korea.
Moreover, South Korea has a strong traditional financial system, including banks and securities companies. This makes Koreans more inclined to use traditional financial instruments instead of DeFi. Cryptocurrency and DeFi are still relatively new and may take more time to integrate into Korean financial culture.
Finally, there are educational and cognitive aspects that are also a challenge. The threshold for DeFi is too high for ordinary investors, and the income cannot provide enough gambling excitement. Therefore, unlike the "digital gold" concept of Bitcoin advocated in the West, Koreans pay more attention to the speculative nature of cryptocurrency. This is exactly what the Korean stock market is used to doing, except crypto opens up new possibilities.
According to the Digital 2022 Global Overview Report survey, in 2022, the number of cryptocurrency investors in South Korea will account for more than 13% of the South Korean population, accounting for more than 6 million of the total population. The main activities of these investors revolve around CEX. This makes CEX’s influence in the Korean encryption market quite significant. So what are the well-known platforms and projects in South Korea?
Mainstream platform specializing in “Kimchicoin” During the cryptocurrency boom in 2017, South Korea became a popular trading place for Bitcoin and other virtual currencies. At some points, the Korean market even contributed the vast majority of the global market share. However, a series of security breaches and hacking incidents occurred in 2018, and many Korean platforms were affected, such as Bithumb, Coinrail and Youbit. Youbit even lost 17% of its assets in a second hack and was eventually forced to file for bankruptcy.
These incidents also caused heavy losses to related investors, but despite this, Upbit jumped to the second largest platform in the world, indicating that South Korea’s crypto trading volume is still considerable. At present, in addition to Upbit, the mainstream platforms in the Korean encryption market include Bithumb, Coinone and Korbit, but Upbit is far ahead, accounting for nearly 80% of the Korean cryptocurrency trading market. Bithumb maintains a strong position as the second largest player in the market, accounting for 15% to 20% of total trading volume on the top four exchanges, Coinone has a market share of between 3% and 5%, and Korbit has less than 1%.
According to relevant analysis, Korean traders show higher risk appetite. Bitcoin and Ethereum account for a relatively low share of transaction volume compared to global markets, with altcoins such as Loom Network, eCash, and Flow accounting for the majority of transaction share. Among the user base of the Upbit platform, most individual investors also prefer riskier altcoins, which is the main reason why altcoins are so popular in the Korean cryptocurrency market.
韩国市场流行的山寨币包括 Steem Dollars、MossCoin、Hippocrat、Aha Token 等，然而，这些加密资产主要在 Upbit 上进行交易，并被称为「泡菜币」。这些 Token 主要由韩国投资者交易，并在 Upbit 平台上形成了自己的市场，因为它们在全球市场上并未引起太多关注。
因此，在 Upbit 平台上，主流 Token，如比特币（BTC）、以太坊（ETH）和 Polygon（MATIC），表现相对较差，这些 Token 在全球范围内都有着大量的交易量。然而，在 Upbit 内，它们的交易量相对较低，只有 2% 的交易量来自 ETH，只有 9% 来自 BTC。从全球市场的角度来看，今年以来，Upbit 一直位居第二。这种现象反映了 Upbit 具有独特特点，投资者的偏好和策略在地区之间存在差异。此外，值得注意的是，Upbit 已在上个月获得新加坡监管机构的批准，为其在新加坡的发展铺平了道路。
许多年轻人期望通过「炒 B」来实现财富自由，摆脱经济压力并实现阶层跃迁。然而，类似于任何新兴产业，由于涉及到巨大的经济利益，相关监管规范尚未同步跟进，从而导致了一系列问题。
尽管自 2017 年以来，韩国已经禁止了各种形式的 Token 币发行，并针对相关违法犯罪活动进行了规范。但这并非国会层面的立法，而是由政府机构或部门制定的规定，监管立法尚未出台。
自 2022 年以来，或许受到众多爆雷事件的影响，特别是 Terra 的倒闭和 FTX 的崩盘，韩国开始采取更为密集的加密监管措施。去年，韩国着手起草《数字资产基本法》，旨在加强对本国加密货币市场的监管，并计划推出 CEX 系统以取缔非法平台，从而进一步优化法规以支持可持续发展。
此外，随着于 2022 年 5 月当选的新任「加密友好总统」总统尹锡烈，他承诺将放宽加密监管，市场正朝着显着合法化的方向发展。
Overall, as the fourth largest economy in Asia, South Korea is one of the most active countries in the cryptocurrency market and has become an integral part of the global crypto market. As crypto activities gradually become legalized, will those Koreans who hope to achieve wealth freedom, get rid of economic pressure, and achieve a class jump through "speculation" be able to do so?
