South Korean Cryptocurrency Investors' Perspective: Why is DeFi not popular in Korea?

DeFi researcher IGNAS published views on Korean cryptocurrency investors and the market on Substack. The following is a summary of the content.

Peeking into the Lives of South Korean Cryptocurrency Investors

IGNAS stated that South Korea accounted for 20% of global Bitcoin trading volume in 2017, making it the largest market for Ethereum as well.

The local enthusiasm for cryptocurrency trading led to several instances of "kimchi premium" between 2017 and 2018. The trading price of Bitcoin in South Korea even exceeded that of the United States by 40% at one point, attracting many illegal arbitrageurs from both domestic and foreign markets.

As a result, in 2018, the South Korean government implemented KYC verification for trading and banned Initial Coin Offerings (ICOs) to curb the fervor, but it did not stop the investment craze among South Koreans.

IGNAS mentioned that South Koreans pursue speed and efficiency, including quick wealth accumulation. However, avenues like stocks and real estate investments are not easy, leading them to lean towards gambling, which is also prohibited in South Korea. This prohibition on gambling has made cryptocurrency an avenue seen as a way to get rich quick.

The Current State of Cryptocurrency Regulation in South Korea

Interviewing South Korean friend Jake, he believes that regulation is a crucial factor affecting the development of the cryptocurrency ecosystem. Starting in 2021, centralized exchanges (CEX) must register with local financial regulatory authorities and comply with security license requirements. Users not only need to establish a government-recognized bank account to participate in trading but also have to report the deposit and withdrawal records from their self-custody wallets to CEX. Some CEX even restrict transfers from decentralized exchanges (DEX) to CEX.

IGNAS attributed the recent closure of several CEX to the strict regulations on cryptocurrency trading in South Korea.

Reasons Why DeFi Is Not Popular in South Korea

After discussions with two industry professionals, IGNAS concluded that the stereotypical view of cryptocurrency trading as speculative behavior is the main reason DeFi has not taken root in South Korea. Other reasons include:

• The returns from DeFi are not attractive enough for South Korean investors who seek high-risk speculation.
• Local investors have a deep-rooted trust and reliance on CEX.
• Self-custody concepts are not prevalent, and the use of wallets like Metamask and Ledger is not widespread.
• DeFi features are complex and mostly in English, posing a significant barrier for South Korean users.

IGNAS also suggested that for DeFi projects to enter the South Korean market, intuitive and localized user interfaces, promotion through local Key Opinion Leaders (KOLs) and major media outlets, and even partnerships with CEX could be solutions.

Interviewing South Korean friend Jake, he provided another perspective:

South Korean cryptocurrency investors who have been trading in recent years know how to make money quickly without much effort, mainly by purchasing high-risk altcoins through user-friendly CEX platforms. Therefore, they have no reason to use complicated DeFi tools.