The word ‘complicated’ is the most appropriate to define the relationship between South Korea and the crypto world. The Korean Won is the third most exchanged currency for bitcoin, but the South Korean authorities have always showcased an uncertain approach toward digital currencies.
A round figure of approx 50% of the millennials is either unemployed or underemployed, leading to the adoption of cryptocurrencies in the country. The adults may trade on the filed exchange platforms using their real name accounts at a particular bank with the exchange account. The exchange and the bank must verify the user’s identity and implement anti-money laundering stipulations. On the other hand, minors and foreigners are not permitted to trade digital coins.
Cryptocurrencies – A phenomenon?
South Korea is one of the influential trading cores for Bitcoin and a wide range of altcoins. As per reports, though education is a priority, only 32% of the youth consider it an essential asset, and just 22% of young Koreans believe in the weight of hard work as a leading step towards success. This changed how young people work for a living and led to a surge in crypto coins trading. Coffee shops began issuing digital coins, and television networks initiated game shows based on cryptocurrencies. Purchasing digital money became easier than obtaining loans or buying stocks.
Despite an enthusiastic cryptocurrency market, the South Korean government appeared to lack interest. Seoul cautioned to outlaw cryptocurrency trading in 2017 resulting in a petition signed by an extensive gathering of people to desist the government from forbidding the regulation. Bithumb and Coinrail, the two significant South Korean crypto exchanges, became the hack's gulls.
ICO ban – The Financial Supervisory Service (FSS), after restraining the ICOs, ultimately banned the offerings and continues to maintain them. Taxing digital coins was challenging for the legislation and executives to implement. The Korean government commenced a three-month investigation and announced the initial coin offerings to be ‘very risky.’
Also, the country prohibited obscure bank accounts used to trade cryptocurrencies.
Did South Korea fear Bitcoin?
Why did South Korea ban cryptocurrency trading despite being classified among the most important digital currency markets? Did it just renounce its role as a digital money exchange pilot or oppose its trend?
As suggested, the country did have several reasons to be afraid of bitcoin, the major being the potential of Kim Jong-un to use the coin as a secret economic weapon for North Korea. Further, with more than half of the young population adopting bitcoin, the government feared the inflowing of corruption in the nation. In addition, the South Korean Prime Minister expressed his concern over the possible application of bitcoins for illegal acts such as drug dealing or market fraud.
Impact of restrictions
The collapse in virtual currency trading eventually resulted in debts and losses for the same people who transformed the country into a well-framed crypto world. Crypto paved the way for money, moving from one society to another. Koreans helped spur bitcoin’s reputation. According to a survey, three out of every ten Koreans had invested in cryptocurrencies. The injunction decreased the income opportunities.
Bitcoin dropped with the South Korean ban.
No sooner did South Korea declare a ban on cryptocurrencies than the value of bitcoin dropped to its lowest levels. The regulations in the country-influenced Bitcoin’s price exceptionally. BTC slumped to as much as 12%, Ripple tumbled by 14%, and Ethereum collapsed by 4%. The cryptocurrency had peaked by more than 900%, achieving the position of the most significant traded digital coin.
Busan – A regulation-free Blockchain city
Amid the unclear picture of bitcoin’s future in South Korea, the regulators did initiate the adoption of blockchain in the country. Busan, the second-largest city in South Korea, was elected as a regulatory-free zone for blockchain in April. Besides, it is expected to partner with the BNK Busan Bank for the accelerated spread of blockchain-based monetary functions.
A whole of eleven regulations has been eliminated for the project. The issue of local currencies is assumed to aid Busan in leading the way in the blockchain tech sector. The city is a hub for Korean exchange and a center for trading and finance. The local currencies, explicitly the local digital coins, are presumed to strengthen the regional economy.
Korea’s oldest bank – A blockchain-based service
The Shinhan Bank, the oldest in South Korea, originated a blockchain-based lending program in May 2019 to enhance time and cost-effectiveness for the public. The platform will assist people in requesting loans online without an in-person interplay. Also, the application of blockchain would intensify security.
S-coins – The cryptocurrency of Seoul
The largest city in South Korea, Seoul, will introduce its blockchain regulatory assistance in November. The city proclaimed the development of 14 services based on the ledger system by 2022. Post blockchain adoption, the city is now prepped to establish its native crypto coin – the S-coin by November. The determination is to uplift the local financial position by using the S-coin for public aid. Though termed a digital currency, the coin will be monitored by the authorities and backed by national fiat money.
Production – Fulfilling the duties of citizenship, like paying taxes, engaging in opinionated public polls, and more would generate currency in the form of rewards.
ZeroPay, a city-government sponsored QR-code qualified interface, will blend with the point criteria and authorize people to pay for goods via their smartphones with no extra charges.
Besides, the Korea Internet Security Agency (KISA), The Ministry of Science and ICT launched a public blockchain ‘part-time workers’ rights protection service in 2019. The aim of beholding the program is to promote trust and associations between small firms and part-time operators.
Blockchain activities are undoubtedly speeding up in South Korea following Facebook’s announcement of its cryptocurrency launch. Kakao, the South Korean messaging app, stated the beginning of executing their crypto wallet named ‘Klip’ following this year.
A company representative reported, “Klip has just launched a teasing site before the launch of its wallet, which will take place in the second half of the year.”
Ground X, a subsidiary specializing in the blockchain, is accountable for developing a wallet. The wallet will support the company’s native token, Klay and other cryptocurrencies based on the firm’s blockchain, Klaytn. Shinhan Bank will also collaborate with Kakao Talk’s subsidiary to boost ledger security.
Another solid stone for the technology is the launch of a blockchain-based mobile identification system initiated by major South Korean firms by the end of the succeeding year. The companies coming together for the project are KEB Hana Bank, Woori Bank, KOSCOM, SK Telecom, KT, LG UPlus, and Samsung Electronics.
Samsung has finally incorporated a BTC function on its blockchain-assisting smartphones. The South Korean tech jumbo has enabled bitcoin features to SDK (software development kit) of models S10e, S10, S10+, and S10 5G, along with the Note10 and Note10+ devices. The kit will approve the android devices to associate blockchain addresses to the Keystore, confirm cryptocurrency transactions, and review the status.
Is South Korea apprehensive about Libra?
Libra, the Facebook cryptocurrency, is not yet launched but is winning in threatening nations worldwide. South Korea’s Financial Services Commission (FSC) stated how If 2.4 billion Facebook users worldwide transfer one-tenth of their bank deposits to Libra, the banks’ creditworthiness would vanish along with their loan reserves, framing a menace to the upcoming markets.
The Korean professionals are divided in their views on Libra. While some think of it as an achievement in the crypto business, some believe it to be an insufficient decentralized network. It can either ascend the values of digital coins or ultimately reduce the value of fiat currencies.
As reported by Korea, if a global social platform like Facebook will buy its bonds rather than deposit with customer funds, the financial status of banks is all the way downhill. Furthermore, if Libra permits overseas transactions, the trillions of the nation’s money would be extensively lessened.
Cryptic future of crypto in South Korea
The portrait of digital currencies is evaluated to be blurry in South Korea. Although the country takes blockchain technology to peaking heights, its take on the crypto world is still uncertain. The declaration of S-coins execution in Seoul is just a take of pseudo-cryptocurrency, as the possession and control of the coins will persist under the government.
The country’s ride to salutary and durable blockchain adoption might be a stepping stone to a positive crypto world in South Korea, though what the future holds remains a mystery.