South Korea claimed the limelight of the cryptocurrency craze last year, provoking much of the digital currencies’ boom and bust of 2017. Bitcoin trades in South Korea neared 20% of crypto trades globally, causing the prices of Bitcoin and Ethereum to balloon to up to 50% of the global average. The country has often played an outsized role in the global cryptocurrency market.
But as the crypto frenzy spread and even entered the mainstream with some businesses accepting payment in digital currencies, the government saw red and warned of a widespread gambling addiction.
When fears of a harsh South Korean government crackdown or ban on cryptocurrency trading spread in January this year, the value of Bitcoin tumbled. And true to the rules of the inflated investment game, this sparked panic amongst investors and became the first domino to cause some of the biggest crypto currencies’ market capitalisations to sharply fall.
Amidst fears of digital currencies being used for money laundering and suspicions of North Korea being behind some of the major crypto exchange hacking incidents, the South Korean government ruled, with effect from 30th January 2018, that only real-name bank accounts can be used for cryptocurrency trading. South Korea’s financial regulator further prohibited domestic firms from participating in ICOs.
Hong Nam-ki, Government Policy Coordination minister, said in a statement that the government’s basic aim is to prevent any illegal acts or uncertainties regarding cryptocurrency trade, while nurturing blockchain technology.
South Korea’s neighbour, China, further compounded the clamp down on digital currencies, issuing an all-out ban on ICOs and regulations which led to the closure of some exchanges’ domestic trading operations.
Despite this turbulent backdrop, the country remains home to three of the world’s largest crypto exchanges. What sets the South Korean crypto market apart from other global crypto hubs is the many ways in which its seeped deep into the mainstream market.
Earlier this year, South Korea’s largest cryptocurrency exchange Bithumb announced 6,000 stores nationwide would be able to sell their goods through a joint venture with Korea Pay’s Service, a mobile payment operator and gift card platform.
Big brands including Starbucks, Outback, seafood buffet restaurant Todai, candle store Yankee Candle, Kakao Talk, cafe Sulbing, and Cafe Droptop are among firms included in the partnership that will enable widespread payment with cryptos.
The environment remains attractive to digital currency entrepreneurs, keen to bring their payment solutions to the wider market: “We hope that by providing a transactional platform that is fast and scalable we can compete as a real-time usable payment solution that someone could use to buy a cup of coffee with,” says Niall Moore, R&D Team Leader, as the team steps up efforts to bring cryptocurrency Hycon into real-world use throughout South Korea through partnerships with government agencies and private businesses.
Hycon is a transactional medium, built on top of its own base protocol, which has been developed from the ground up to lay the groundwork for a highly-scalable on-chain solution.
The crypto currency is listed on OKEx, Bit-Z, and OKCoin Korea, and like other entrepreneurs of the digital age, the firm is fast seizing opportunities to further expand into the mainstream market.
Moore explained that “Hycon is an open source, permissionless blockchain, and our R&D team is focused on developing and improving that base platform.
He says that moving forward there is “huge scope” for growth in the private sector; “we have a separate enterprise focused team who are working on bringing Hycon into the real world through partnerships with government agencies and private businesses in South Korea.
“Not all blockchains have to be disruptive,” he adds; “Hycon is all about on-chain scalability. We are going to be employing some novel data structures allowing us to build a DAG of blocks using a consensus algorithm called SPECTRE which will allow us to increase our transactional throughput 30 fold from our current levels and beyond.
“Having been primarily involved in the remittance industry it was decided to try to solve some of the existing problems found with well-known blockchain platforms. Hycon is the result of that decision.
“Right now, our market cap puts us in the top 150 coins out there, so there is plenty of room for movement.”
So why has South Korea been among those leading the charge in bringing digital currencies to the mainstream?
According to some industry insiders, its the lack of good alternative investment opportunities in the country that has created fertile ground for investment in ICOs and use of digital currencies. Local investment options have been somewhat limited to the highly pressured markets of real estate and the domestic stock market.
But real estate prices and interest rates have been on the rise, and investing into derivatives requires individual investor certification that is not easy to obtain.
In this environment, there’s a huge demand for investment options that are easy, open, and widely available to the general public.
Similar to investing trends across the globe, it’s the younger South Korean population that has jumped aboard the ICO and crypto bandwagon first and foremost.
According to reports by the Korea Financial Investors Protection Foundation, 1 in 5 people in their twenties have purchased some form of digital currency.
The decentralised future and the investment options it offers have attracted tech-savvy 20-30 year olds, keen not to cash in on new opportunities to make their money work for them.
Unsurprisingly, although the younger generation attracts more investors, it’s the older generation of South Koreans that invest the most, according to a Korea Financial Investors Protection Foundation survey, the average cryptocurrency investment among 20-somethings was around 2.9 million won versus 6.29 million won for South Korean investors in their 50s.
But it’s not just South Korea that has seen digital currency begin to spread into the mainstream. For some governments, including Venezuela, Russia, Turkey, and Iran, the idea of a state-backed digital currency is appealing as a way to evade US economic sanctions.
The Marshall Islands also passed legislation to enable the launch of its own cryptocurrency to phase out reliance on the US dollar.
Reportedly, Dubai is developing a blockchain-based digital currency emCash, – set to act as a legal tender for public and private debts.
There’s no doubt that while the South Korean government has chosen a path of cooperation with the digital currency industry, it’ll soon be among many other innovative leaders keen to see their nations enjoy a technological head-start to widespread use of decentralised transactions.