Financial news

Despite a small population of around 50 million in South Korea, the region has drastically taken control of a significant proportion of the global crypto trading volume. But why has the sector seen so much success? Tiger Research explores in its latest report.

According to cryptocurrency data provider, CCData, Upbit, the South Korea-based crypto exchange, experienced a whopping 42.3 per cent surge in trading volume last July, amounting to $29.8billion.

This surge propelled Upbit to the second rank globally among crypto exchanges. The Wall Street Journal also reported that in May, a staggering 13 per cent (or $58.3billion) of Binance’s trade volume originated from South Korean users. This suggests that while Upbit accounts for the world’s second-largest trading volume, 13 per cent of Binance’s trading volume is from South Koreans.

More intriguing is the fact that 100 per cent of Upbit’s trading volume comes from Korean nationals. Due to South Korea’s regulations, Upbit services are only available to those with Korean citizenship and Korean Won bank accounts.

The fact that 0.6 per cent of the global population is commanding between 10 and 20 per cent of the global crypto trading volume reveals the popularity of the crypto market in South Korea.

So why is crypto so popular amongst South Koreans? 

Daniel Kim, CEO of Tiger Research, explains how strict anti-gambling regulations may have actually boosted the cryptocurrency sector across South Korea: “After the enactment of the Special Payments Act, South Korea has implemented strict management and control over crypto-related businesses.

“While fraudulent activities still persist at the token project level, scam incidents at the exchange level are rare. Asset segregation practices, combined with the DAXA alliance overseeing token listing and delisting procedures, have cultivated trust among investors.

“Secondly, millennials, especially those in their 20s and 30s, are familiar with token and coin investments. Real estate, traditionally South Korea’s investment darling, has become increasingly out of reach for many, with a 3-bedroom apartment in Seoul’s Gangnam district costing over $2.5million. Hence, stocks and crypto have emerged as the primary investment avenues for younger generations. Their trust in exchanges, comparable to their trust in established securities firms, plays a significant role.

“Lastly, the inherently volatile nature of the crypto market resonates with the risk appetite of Korean investors. While gambling is largely restricted in South Korea, with only one state-designated casino operating legally, the younger generation perceives cryptocurrency investments as akin to gambling, with the added allure of high returns.

“Many of my peers find the traditional stock market’s 10 to 20 per cent annual returns ‘boring’ compared to the dynamic crypto market. Essentially, the government’s stringent anti-gambling regulations have indirectly funnelled the gambling appetite of many towards the cryptocurrency sector.”