One reason for the surge in crypto investment in South Korea is Bitcoin’s strong performance. As of November 2, the largest cryptocurrency has risen 99% over the past year to US$69,562. South Korea’s Financial Intelligence Unit has emphasized that the U.S. move toward approving a Bitcoin spot ETF and supportive policy announcements have further bolstered South Korea’s crypto markets. Popular virtual assets in South Korea include Bitcoin, accounting for 37.2% of investor holdings, followed by Ethereum (11.1%), Ripple (10.6%), Dogecoin (2.8%), and Ethereum Classic (2.7%).
Another reason South Koreans are increasingly investing in crypto is that younger people are not confident in the country’s pension system. A recent survey on the subject revealed that 75% of young people in the country (ages 20-39) do not trust state-issued pensions and see both the stock market and cryptocurrencies as better investments. Over 50% of respondents said that they were making their own pension plans claimed they were building their retirement funds with stocks and crypto.
At the same time, volatility in cryptocurrencies remains a challenge. In the first half of the year, South Korea’s crypto market recorded a maximum drawdown (MDD) of 70%, a marked increase from last year and notably higher than the KOSPI index’s MDD of 14% over the same period.
Meanwhile, crypto related crime is rising in Korea. While the most infamous example remains Do Kwon’s multi-billion-dollar TerraUSD-Luna fraud, other, smaller scale scams are proliferating, necessitating new regulation to protect investors and both deter and penalize crime. According to the FoFIU, Korean digital asset exchanges flagged 49% more suspicious transactions in 2023 compared to 2022.
In response to the rise in digital asset-related crime, South Korean regulators are stepping up pressure on local crypto exchanges to root out questionable trading, part of efforts to improve investor protection with a new digital-asset law that took effect in July. Earlier this year, the Financial Supervisory Service (FSS) said that it would establish is a system to monitor for unusual crypto trading activity. The regulator urged exchanges to feed data and information into the system to ensure compliance with the legislation that became active on July 19.