South Koreans’ interest in cryptocurrency is legendary. In 2017, the nation, with just over 50 million inhabitants, contributed to a staggering 20% of all Bitcoin trades and emerged as the largest market for Ethereum (ETH).
However, many do not realize that while South Korea’s love for crypto is fervent, their distaste for decentralized finance (DeFi) is equally pronounced.
Embracing the Digital Gold, Not DeFi
Bitcoin’s phenomenal rise found its echo chambers in South Korea, where a populace steeped in rapid tech adoption eagerly took to crypto. From students checking Bitcoin prices between lectures to elderly grandparents hedging their retirement on crypto, the digital wave swept across generations.
The surging demand led to what was termed the “Kimchi premium.” This is a phenomenon where the local price of Bitcoin soared up to 40% higher than its United States counterpart.
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South Korea’s rapid tech adoption helped the nation transform from an impoverished nation to a global economic powerhouse. This meteoric rise is attributed to family-owned conglomerates called chaebols, emphasis on exports, and a diligent workforce.
Every facet of Korean life, from food delivery to construction, embodies the mantra of efficiency and speed.
But as the traditional avenues of amassing wealth like real estate and stocks became saturated and less lucrative, Koreans sought alternative high-risk avenues. With gambling heavily restricted and stigmatized due to addictive tendencies, crypto exchanges emerged as the new casinos.
Cryptocurrency, especially altcoins, provided the allure of instantaneous significant returns that other traditional assets like gold could not promise, according to DeFi researcher Ignas. However, the narrative changes with DeFi.
South Korea and the DeFi Disconnect
Despite its crypto craze, South Korea remains surprisingly averse to DeFi. Notwithstanding efforts by large blockchain firms like Klaytn, backed by the Korean tech giant Kakao, DeFi has struggled to gain traction. The reasons are multifaceted:
- Trust in Traditional Systems: South Koreans highly trust their financial and banking sectors. Centralized exchanges like Upbit and Bithumb are familiar entities with fewer complexities than DeFi platforms.
- User Experience Barriers: The average Korean crypto enthusiast finds navigating DeFi platforms difficult. Setting up wallets, safeguarding private keys, and managing deposits and withdrawals are perceived as cumbersome.
- Educational Gaps: Most DeFi platforms primarily cater to English-speaking audiences. Due to language barriers, most instructional content and resources remain inaccessible to the average Korean investor.
- Regulatory Hurdles: In 2021, stringent crypto regulations came into play in South Korea. Requiring real-name bank accounts and reporting all crypto-related transactions has added layers of bureaucracy, stifling the freewheeling nature that DeFi platforms typically offer.
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Doo Wan Nam, COO at StableLab, pointed out that while Koreans show interest in DeFi elements, overarching barriers like language and unfamiliarity with self-custody options hinder widespread adoption.
“Though Korean users show interest in DeFi elements such as loans and earnings, the use of self-custody options like Ledger and MetaMask is not widespread,” said Nam.
Meanwhile, Garlam Won, Managing Partner at Momentum 6, concurred, citing structural rigidity, demanding work schedules, and timing issues arising from the timezone difference with the US as additional challenges. Still, Won believes that once Koreans start making money from DeFi platforms, “the frenzy begins.”
To bridge this disconnect, there is a consensus on making DeFi more accessible to Koreans. This includes translating resources, collaborating with local entities, and fostering education.
After all, the potential of DeFi is universal. And with the right steps, Korea might become its next big frontier.
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