South Korea is the 11th largest economy in the world. It is home to tech giants like Samsung, Hyundai and Kia. The country boasts of a highly educated economy. But as of 2016, its underemployment rate stood at 38 percent that led to many in working jobs that they were overqualified to do. Even individuals with an impressive employment track record found it difficult to afford the average rent of 426 million Won ($400,000). The rising cost of living and the unavailability of an alternate way of earnings had sent the tech savvy millennial into a feeling of depression and hopelessness and making them believe that they won’t fare better than the previous generation.
All That Glitters Is Gold….(At Least For The Koreans)
Few in Korea started early in cryptocurrency but it wasn’t until Lambhorgini with “BITCOIN” written on their number plates hit the roads, the fact that “virtual currencies are actual money” and not just some stupid “nerd money” started sinking in to the Koreans. The interest in cryptocurrency for Koreans enormously spiked in the late of 2017 amidst the cryptocurrency prices soaring sky high.
A report suggested that 3 out of 10 Koreans invest in cryptocurrency and most of them were between the age of 20–30 years. The word, “ To the Moon” and “Lambo”, spread out fast, all thanks to the super connectivity — a Korean teenager uses their mobile device for more than 4 hours a day, all homes have internet access and 88 percent owns smartphones.
This interest has been largely attributed to 3 reasons:
1. The flashy life of early crypto traders.
2. The current system of the society where Korean millennial believed that they won’t fare financially better than their parents or grand parents.
3. Lack of alternative investment options.
For many Koreans this was a gateway to a better financial world and in their own words “ I finally wouldn’t end up dying paying for an apartment and a car that i didn’t like”
A Worried Government Starts The Crackdown
While Koreans were living their own version of ‘The American Dream’, the atmosphere inside the Ministry of Justice office was tensed. Minister Park Sang-Ki and his officials were disturbed by the speculative nature of cryptocurrencies. Many of them considered it to gambling and a system that facilitates money laundering and terror funding.
While there were murmurs of the government’s uneasiness, it wasn’t until September of 2017 that things took turn for worse for crypto traders in the country.
The first hint of governments displeasure with cryptocurrencies came with the proposed ban on ICO in September.
Timeline Of Regulatory Crackdown On Korean Exchanges
September 29, 2017 — Officials hints on proposing a legal amendment to prohibit all ICOs.
December 13, 2017 — Bans minors and non-resident foreigners from trading.
January 9, 2018 — National Tax services and police raid offices of Korean exchanges Coinone and Bithumb.
January 11, 2018 — Justice Minister Park Sang-Ki hints on drafting a legislation that would shutter all virtual currency exchange.
January 30, 2018 — Banned use of anonymous bank accounts for virtual coin trading.
May 11, 2018 — Korean exchange UPbit raided over money laundering issues.
Did The State Fail Its Millennials?
The prices of cryptocurrencies tanked down significantly after the January 11 proposal of the Justice Minister to ban cryptocurrency exchanges. People got worried and started exiting the market. The future of cryptocurrency and its investors seemed gloomy in Korea. A lot of them had pledged their homes to buy cryptocurrency and now had to sell it for losses. Families were broken and often lead to divorces. This led to a surge in the number of suicides reported due to losses in cryptocurrency investments. There was an increase in the number of patients visiting psychiatrist, the trauma was termed ‘Bitcoin Blues’.
Why Is Korea Important To Cryptocurrency?
Korea is a country obsessed with cryptocurrency and has over 2 million traders. The cryptocurrency prices in Korean markets were at a 51% premium over its American counterparts. The country is home to one-third of all major crypto exchanges. In fact, the Won is currently the third most traded currency for Bitcoin accounting for over 5% of all BTC trading. At some point, it was the highest traded currency for Ethereum. Even the central bank had to refrain its staff from trading cryptocurrency particularly during work hours.
The overall growth and adoption of cryptocurrency market heavily relies on how Korean regulators treat it.
An outright ban could be a major blow to the industry. However, the regulators seems to be taking a softer stance towards cryptocurrency and talks are being held over regulating ICOs in the country. If confirmed, this could be a huge boost and might even shoot up the prices the of cryptocurrencies globally.