The South Korean government has repeatedly mentioned to cryptocurrency traders in the country that cryptocurrency trading is similar to gambling. This is because cryptocurrency cannot be considered legal tender or a form of currency because they are not a reliable form of storage. In fact, the South Korean government stated that these are simply virtual tokens. Due to the speculation mania that is ongoing in the country, the South Korean government is even considering shutting down the exchanges operating within their borders. When this announcement was made in January 2018, it shocked the investors, as it caused a price drop in the cryptocurrency market.
Of course, the price drop can’t be attributed to that announcement alone, but there is a reason to believe that South Korea plays a major role in the cryptocurrency market. When the South Korean government made the announcement, they directed it to those young and old people who are investing in the market without knowing the risks involved. When this group of people saw the price of Bitcoin going up, some immediately invested in the market without thinking of the consequences of doing so.
Young people are the biggest fans
When it comes to cryptocurrencies in South Korea, the biggest group of investors come from young people. It quickly became apparent to them that cryptocurrency could be a way out from their financial troubles. This notion was mirrored across the nation as South Korean cryptocurrency transactions took up nearly 30% of the global cryptocurrency trading.
South Koreans trade a considerable amount of Bitcoins. Young people also took the chance on trading into alternative coins because they saw potential in making a profit faster than Bitcoin.
The reason behind the cryptocurrency infatuation
Young Koreans are attracted to the cryptocurrency market for a simple reason. They saw that it provided an opportunity for financial freedom. In Korea, the country has suffered from an economic slowdown, which resulted in more young people being unemployed. On top of that, some are overqualified for jobs, and it causes underemployment. The total number of unemployed people in Korea is about 1 million people, and 40% of them are young people.
Due to the global financial crisis, young Koreans had to consider how they are going to improve their economic condition. Just about 50 years ago, Koreans were struggling as the generation at that time was very poor. Some of them could barely survive with the food regime provided by the United States and other countries. However, the country managed to turn its economy around by successful economic development policies. As a result of this, Korea quickly turned into a high-tech IT society where nearly every one of its citizen has a smartphone.
Also, parents are more likely to spend on their children’s education to improve economic success and social status within the society. In fact, the average Korean is educated at the university level. There are plentiful college graduates within the country, which is a result of families wanting their children to have a better life. Despite having a high-quality workforce, the job market has significantly narrowed down, creating serious social problems. On top of that, getting into universities is also increasingly difficult because of tough competition.
Young people feel increasingly pressured as the social structural problem has led to an increase in unemployment. Graduates find it difficult to find jobs as well because applying for jobs is very difficult.
Then, came cryptocurrencies.
So, you can only imagine what happens when the media started telling stories about people are winning millions to billions worth from their investments. As young people are increasingly connected to social media and media platforms, a lot of them caught the news. In fact, people in middle school even trade cryptocurrencies.
The Korean government is accepting cryptocurrencies
At the end of 2017, it seemed like the Korean government was going to ban the trading of cryptocurrencies. However, the government made an official announcement that it was determined to implement blockchain technology in different areas of the country. This includes their electronic voting system, real estate industry, a management system for animal services, and an online platform to support youth activities. On top of that, the government is preparing an allocation of funds especially for start-ups that develop a solution for these blockchain applications.
However, something good came out of the ongoing speculations, as the Korean government is now implementing the use of blockchain in their country. Therefore, the government is encouraging the development of blockchain to move from just being an infrastructure for supporting speculative cryptocurrencies to finding more practical applications in real life.
The change happened because many young people threatened to object to the ruling party candidate in the next local elections if there was a possibility that the exchanges were shut down. The next challenge for the South Korean government is how they will build useful blockchain technologies. They are building 5G communication technology that is going to be implemented in 2019 so it seems likely, as they have one of the highest Internet penetration rates in the world.
Vocal young Koreans protest against government crypto crackdown
In Seoul, South Korea, the government seemingly hinted that the Ministry is preparing legislation to ban cryptocurrency trading true exchanges. As the government is continuously implementing tighter virtual currency controls, South Korean cryptocurrency traders have a good reason to worry. After the threat to the ruling party that they won’t support the candidate in the upcoming election, the president of South Korea is left in a dilemma.
When cryptocurrencies were introduced in South Korea, most people were trading in the US or Europe. However, change came in 2017 when Japan and South Korea officially made their debut into the cryptocurrency trading world. After Japan announced that it recognized Bitcoin as a legal tender, this resulted in hundreds of thousands of Japanese merchants accepting Bitcoin as a form of payment.
South Koreans and their love for Ethereum
Yes, Bitcoin is a major cryptocurrency, but South Koreans have a good relationship with Ethereum. In fact, over 40% of the Ethereum traffic can be accounted to Koreans. The love affair that Koreans have with Ethereum is shown their willingness to pay a 40% premium to the rate deal cryptocurrency. One of the reasons that people love Ethereum is that some of them saw that it was too late to join in the Bitcoin craze. So, Ethereum was the next best thing that they could get into.
Another important reason was that the founder of Ethereum personally met with a lot of Korean cryptocurrency enthusiasts, which put a face to the cryptocurrency. Therefore, this inspires the confidence of Koreans within the cryptocurrency space. In fact, a lot of Koreans were lucky to make a lot of money when Ethereum rose in popularity. Mass media also largely helped Ethereum’s rise in value.
Why is Korea suddenly so interested in cryptocurrencies?
Although there is no easy answer for this, there are several possible explanations for the cryptocurrency fever. The cryptocurrency market largely comes from wealthy Korean business owners and upper-class Koreans who have discovered the potential profits of investing in the market. The investment options in Korea have decreased over the past few years. In fact, the real estate market has been a safe option for Koreans to invest in but since it has been increasing it is becoming unaffordable for the average Korean.
Therefore, when Bitcoin came around, it was seen as the opportunity for Koreans to take advantage of its high volatility. Therefore, high-risk traders started flooding the market and pouring the money into the Korean Bitcoin market. Once people started seeing this happening, everyone else followed.
Where is Korea headed?
The number of premiums on cryptocurrencies in South Korea exchanges have decreased in the past few months. Korea still takes up a huge portion of the cryptocurrency trading market and the love for Ethereum is still strong among Koreans. In the future, it may be possible for Korea to see blockchain applications in their daily lives as the government is funding these more blockchain start-ups. As more people know about the potential of the blockchain, it will undoubtedly increase the number of investors in the cryptocurrency market.