Cryptocurrency has seen an exponential rise in use and popularity among South Korean in recent years, with many adopting and investing in the market. Due to the speed in which cryptocurrencies have seen mainstream use, the South Korean authorities are scrambling to implement regulations and policies, but like the market, it is volatile and not immune from controversies and drama.
According to a poll by job portal Saramin, 3 out of 10 salaried workers in South Korea have invested in cryptocurrencies, making the country the world’s third-largest market in cryptocurrency trading after Japan and the US, with an estimated 1 in every 25 citizens, or 2 million cryptocurrency investors in South Korea.
Why is South Korea, with a population of around 51.25 million people with a GDP rank of 14th, leading the world as the top contender in cryptocurrency investments? There are a number of contributing factors to this question, ranging form culture, demographic, politics, and timing.
Deeply embedded in South Korean culture is the use of internet where they boast the fastest and cheapest internet available in the world. As of 2017, South Korea had the fastest average internet connection in the world at 28.6 Mbit/s, according to Akamai Technologies and it is reported to be four times faster than the world average of 7.0 Mbit/s. Compared to the U.S. which pays an average $45.50 per month, according to the Organization for Economic Cooperation and Development, in South Korea, the faster and better connection costs an average of about $28.50. The availability of internet allows for 94% of the population to have high-speed connections, according to the OECD. With internet access widely available, the flow of information is greatly increased and when word spread that cryptocurrency was the next big investment, it spread like wildfire.
South Korea also has the highest tertiary gross enrollment ratio of any country in the world, where 65% of Korean 25-34-year-olds has attained tertiary education (OECD: 2010), while over 97% of that same age group has finished at least upper secondary education. By both measures, Korea ranks Number 1 among OECD countries. With a highly educated society with an adult literacy rate of 97.3% (World Bank 2002) leading the world in innovation and technologies such as the multinational conglomerate Samsung, there is so surprise cryptocurrency landed on their radar and was immediately embraced.
Right around the time when cryptocurrency was beginning to be seen as a viable investment, the biggest political scandal to ever hit South Korea occurred that would end with the impeachment of their president. The impeachment of President Park Geun-Hye resulted due to her relationship with Choi Soonsil, where it was revealed that Soonsil was editing parts of President Park’s speeches and briefing Park’s cabinet despite having no official government title. Choi Soonsil would also eventually be indicted for using her ties with President Park to get donations worth over $70 million dollars to non-profit foundations that Choi controlled. This lead the South Koreans to hold massive protests calling for President Park’s impeachment until Park was fianlly removed her position in March 2016.
Due to this scandal, South Korean authorities were embroiled and didn’t have the time or resources to deal with the new rise of cryptocurrency. Beaucase of this, the Korean exchanges had no regulations or laws surrounding cryptocurrency purchasing and investors jumped to the opportunity, with some purchasing in $100,000-$500,000 intervals compared to the $10,000 interval limit in cryptocurrency exchanges of America.
After the scandal had subsided and a new President by the name of Moon Jae-in was elected, the government found itself in a situation where its citizens were invested in cryptocurrency that they did not fully comprehend and met it with scepticism and concern. To come up with some sort of regulation, the government announced laws effective immediately that ended anonymous accounts, and only permitted trading from accounts associated with legal South Korean citizens, allowing for taxation while preventing minors and non-Koreans from trading cryptocurrencies on Korean exchanges.
As time passes, cryptocurrency will continue to play a large role in South Korean society and both the korean people and the government will have to work together to maintain a healthy open market for cryptocurrencies to flourish so that all parties can benefit.