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Fantom Confidential — 6. Korean Market Key Learnings — Jan 2019 Research Report

by Ashton Hettiarachi

Key Learnings from Jan 2019 Research:

Introduction

Just as large telecommunication companies needed to adjust and evolve with the wide adaptation of the internet, banks and financial institutions will need to adapt and evolve before finding themselves in a disrupted sector. At the same time, companies which are building blockchain technology, products, and financial applications will need to learn how to work with the current financial world, learn from them and evolve alongside them. In that regards, South Korea might actually be the most under-hyped country in cryptocurrency and blockchain world.

South Korea —Investors

For foreign companies such as First, Korea is considered a land of opportunity. The population is filled with early adopters, the domestic market is large, with a few industry giants (i.e. Samsung, LG, Kakao, etc).

Korea is one of the few countries that has nationwide interest in the social and scientific effect of blockchain technology, accompanied with a strong secondary market. Its citizens, local governments, and corporations are all active participants in the blockchain industry, making Korea a strong candidate to be the first for mass adoption of blockchain.

A terrifying economic landscape for South Korean millennials, ultra-high internet speeds, digital culture and tech-savviness have all factored into the exploding petri dish that is the South Korean blockchain scene.

According to some reports, over 3 million Koreans are participating in cryptocurrency trading today, from all facets of life. South Korea is one of the world’s biggest markets for Bitcoin — so it’s no wonder that more than three out of ten salaried workers in the country has invested in cryptocurrencies, according to a study conducted by job portal Saramin.

During the great bull run of 2017, Crypto-related assets became so popular that buyers on Korean exchanges were willing to pay a roughly 32 percent premium on bitcoin and other alternative cryptocurrencies, and Korean ICOs raised unprecedented amounts of money in mere hours.

At one point in November 2017, KRW once accounted for over 50 percent of all transaction volumes among the top 12 cryptocurrencies. Notably, Koreans have a relatively diversified portfolio — KRW accounts for nearly half of global non-BTC market share (54.76 percent), followed by USD (37.22 percent and EUR (3.27 percent) in January 2018.

Government

On the regulation side, Korea is still learning to crawl. The government still has no idea how to tax crypto and the only de facto regulation in Korea now is ‘no regulation’ — counter-intuitively meaning anything related to crypto right now could be illegal.

  • Korean Gov’t: wait-and-see or follow-don’t-lead.
  • Regulatory sandbox laws which are going to be effective from Q1 2019 could be a great opportunity for the government to prepare for setting long-sought permanent rules.
  • Regulation: The government assumed a very clear position — blockchain technology is great and ought to be cultivated, yet cryptocurrencies pose a major threat to innocent investors and these unregulated markets are filled with bad actors. This resulted in two different approaches to these two sides of the industry. On the one hand, regulators followed in China’s footsteps and banned ICOs, imposing harsher measures to protect investors. On the other, the government continuously supported, even subsidized blockchain-based projects and pushed forward the use of blockchain technology within cities and services.
  • Number of public trials subsidized by government has doubled for 2019.
  • Mayor of Korea’s capital city Seoul recently revealed a five-year plan to invest 113.6 billion KRW (approx. $100 million) to transform Seoul into a smart city powered by blockchain. With the Blockchain Urban Plan for 2018–2022, 14 major public services will adopt blockchain.
  • Buying crypto with credit cards, have subsequently been banned by regulators in Seoul. Also, Korean watchdogs have also restricted foreign activity, restraining all foreigners from trading cryptocurrency on Korean exchanges.
  • On a related note, South Korea now considers bitcoin a legal form of currency for the purpose of foreign exchange.

Corporations

Westerners might be stunned by the influence that a few South Korean brands — particularly chaebols (“chae” means wealth or property, “bol” is clan) — wield in Korea. These huge firms — which include Electronics manufacturer Samsung, automaker Hyundai, electronics manufacturer LG, and retailer Lotte — have dominated South Korea’s economy since the country’s economic revolution in the 20th century. They helped make South Korea the world’s fifth-largest exporter with the world’s 11th-largest gross domestic product (GDP). These five companies alone currently control more than 50 percent of the Korean stock exchange in terms of market cap. There companies, along with as many as 45 companies in Korea, are involved in blockchain projects in one manner or another, be it a cryptocurrency exchange, blockchain-based enterprise solution for small companies, or new but promising and risky platforms or tokens.

Two of Korea’s IT conglomerates, Naver and Daum Kakao, have each executed reverse ICOs and created their own blockchain projects — Link and Klaytn, respectively — as the foundation for their future blockchain ecosystem. Klaytn recently announced the first batch of strategic partners comprised of dApps from different industries, showing its commitment to blockchain.

Samsung, LG and the other chaebols will keep pushing innovation forward and developing practical use cases. Monachain(LG), Nexledger(Samsung), Klaytn(Daum Kakao) — these are just some of the names you should expect to hear more often in 2019 and the upcoming years. Through these chaebols, blockchain technology will continue to seep into Korean’s daily lives in many aspects including gaming, payments, healthcare, banking, and many more. If these conglomerates will push blockchain adoption through their products and services, it would drive out the terrifying economic situation that pushed Korean millennials to seek out other means of income, pushing many into the cryptocurrency market as a way to make a quick buck.

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