Things are moving fast in South Korea’s digital currency world. But Kakao’s recent decision to set up a cryptocurrency exchange is possibly the country’s most significant digital currency development yet. To call Kakao Corp an internet giant would be an understatement – its Kakao Talk app is by far and away Korea’s most widely used chat app, while its Daum search engine is second only to the monolithic Naver.
This latest move has seen Kakao team up with American exchange platform Bittrex to create a South Korean system called Upbit. Kakao says Upbit will allow trading in over 100 digital currencies via its Kakao Talk-based mobile stock trading app Kakao Stock.
Part of the plan
On the surface of things, Kakao’s decision seems to have come straight out of left-field, but insiders recognize it as a carefully planned and potentially shrewd move on Kakao’s part. The company has long since branched out from its chat app origins and diversified into an online shopping platform, an Uber-like taxi service, a music streaming service, a video sharing platform and a massive mobile gaming network.
More recently (and more relevantly, perhaps), it has branched out into the world of finance. In July this year, Kakao Corp lauched Kakao Bank, the country’s second Internet-only bank, accruing some 820,000 customers and US$477 million worth of loans and deposits within days of its launch.
And there is also Kakao Pay, the company’s mobile payment system (the second most popular mobile payment platform in the country, behind only Samsung Pay). Earlier this year, a Chinese Alibaba affiliate invested a whopping US$200 million in Kakao Pay, as the service continues to gather momentum.
Last year, Kakao’s venture capital affiliate, KVG, invested an “undisclosed amount” in a Philippines-based Bitcoin startup called Satoshi Citadel Industries. KVG claimed bitcoin and blockchain technology could provide a tonic for Southeast Asia’s “inconvenient” banking sector. Satoshi Citadel, for its part, hinted at more to come, promising “synergies with Kakao and its other business assets.”
Viewed in this context, Kakao’s foray into the world of cryptocurrency was less of an “if” and more of a “when.” Indeed, Kakao is already looking for ways to integrate its Upbit, Kakao Talk and Kakao Pay offerings. Per a Joongang report, traders will also be able to “use Kakao apps” with Upbit, which will make the process “easier for first time traders.”
In fact, it seems like every large, hip-and-happening South Korean IT enterprise now wants a piece of the cryptocurrency action. Nexon, the gaming company behind hit titles like MapleStory, has recently acquired a controlling stake in Korbit, one of the country’s biggest bitcoin exchanges.
Nexon’s deal is worth some US$80 million, and although it appears to represent an unprecedented foray into the world of cryptocurrencies by an unrelated company, viewed in the context of Kakao’s announcement, it is hardly surprising.
Government not so keen?
Although the government had seemed relatively happy to let bitcoin pioneers get on with their own thing until recently, the Korea Fair Trade Commission has recently put the cat among the pigeons.
Its decision to introduce regulations on the trading of cryptocurrencies in South Korea, adjust digital and financial law and introduce bitcoin-specific anti-money laundering amendments to existing acts of parliament has come as a shock to many. The regulators say they will seek to “punish” certain initial coin offerings (ICOs) and cryptocurrency-based fundraising attempts.
The move follows similar decisions from others in the region. These include Australia, Japan, and most notably China, whose governments have all recently unveiled wide-ranging bitcoin exchange regulations.
There are also as-yet-unconfirmed reports that the Korea Communications Commission and the Ministry of Science and ICT will begin on-site inspections at bitcoin exchanges – a possible further result of the Financial Services Commission’s ongoing, task force-led cryptocurrency investigations.
But despite Seoul’s decisions – and China’s crackdown, which appears to have virtually shut down the Middle Kingdom’s bitcoin operations for the time being – bitcoin still appears to be booming in South Korea.
Local analysts say China’s clampdown “will more likely stabilize, rather than stumble, the market.” And Korbit’s former president moved to dismiss the chance of any knock-on effects, saying, “The Chinese bitcoin market has been overheated, and I’m not negative about it.”
Indeed, with China now seemingly out of the bitcoin picture, South Korea’s cryptocurrency market is now the world’s third largest, behind only the United States and Japan. With the country’s blockchain technology fervor also at fever pitch, the stage is now set for bitcoin to go mainstream in South Korea. Nothing, it seems, can derail the South Korean bitcoin train, not ever summer’s high-profile data-breeching hack on Bithumb, South Korea’s largest digital exchange.
And one thing is for certain – if a company of Kakao’s size and influence is willing to throw its lot in with cryptocurrencies, plenty more in the nation will soon follow, no matter how tight government regulations may become. Watch this space, as they say.
Featured image from Pixabay