Bitcoin & other digital currencies are rapidly gaining mainstream adoption in South Korea, disregarding uncertain directives issued by the government.

Bitcoin & other digital currencies are the talk of the town in South Korea – you can now barely walk down the streets of Seoul without overhearing talk of bitcoin prices, which have gone through the roof in the past week.

On Friday December 8, bitcoin mania hit fever pitch with people of all ages (children included) paying premiums of up to 23 percent on bitcoin purchases, and a 40 percent price rise in just 40 hours that saw eyebrows raise across the world. After a lull in activity, the Cboe launch yesterday caused a price spike of 20% within hours, triggering their circuit breakers and halting XBT trading for the day.

Naver, the Korean answer to Google, was flooded with bitcoin-related searches. As the currency reached prices of over 20,000,000 KRW (US$18,200) to 1 BTC on December 8, “Bitcoin” made Naver’s top 10 most-searched terms – a list usually populated exclusively with the names of K-pop stars and drama series. Meanwhile, the phones at Korean digital currency exchange platforms like Korbit were ringing off the hook.

How was any of this possible in a country that had only recently banned initial coin offerings (ICO), and where the prime minister believes that digital currencies are “dangerous” and could turn kids into drug dealers?

Bye, bye bitcoin?

This week has seen Korean digital coverage go from short, niche-interest stories straight to the front page. But despite the country’s sudden hunger for bitcoin, the government seems eager to pour cold water on digital currency mania – and has found no shortage of supporters.

Morning news shows on terrestrial TV channels featured five-minute long sections with puzzled-looking financial experts attempting to explain why bitcoin prices are galloping to unseen heights, and gaining the attention of people who would not normally give a fig for finance.

Economics gurus in the country have issued no shortage of ominous warnings, with some speaking of “toxic overheating” in the bitcoin market. Former government minister and economy expert Yoo Si-min opined on a ratings-topping TV talk show, "I would recommend that people stay well away from bitcoin. It’s speculative, it’s no different from gambling – and will probably be made illegal very soon.”

Indeed the country’s Financial Services Commission (FSC) seems to be on the warpath. It has created a task force that works in close conjunction with the Ministry of Finance, South Korea’s the national tax authorities and the country’s central bank.

ICO bans were just the start of the task force’s work. The FSC has now issued regulations that will mean digital currency traders will soon have to buy and sell using a “single verified, real-name virtual account,” and has moved to ban bitcoin futures investment sales.

The tax authorities, meanwhile, have hinted that they may soon begin collecting tax from digital currency payments.

All of this lends sway, perhaps, to former National Assembly Leader Park Hyung-joon’s claim that “Korea’s bitcoin party is already over.”

Optimists abound

Regardless of the FSC’s actions and the digital currency naysayers, bitcoin is still attracting enthusiasts at an unprecedented rate – and plenty believe there is much reason for cheer.

Even while he was announcing possible forthcoming digital currency regulations, the FSC’s vice chairman suggested “the possibility of toning down the ICO ban.”

And despite the warnings, everyone from high school children to pensioners seems to want a slice of the action, snapping up bitcoin and ethereum at a rate of knots. In a country where interest rates were (until late last month) a record low of 1.25 percent, digital currencies have presented a lot of people with what they believe is a promising way to make money. All forms of gambling are illegal in Korea, and many think that Korea’s stock exchange (KOSDAQ) is riddled with issues – leaving digital currencies as the most palpable form of investment currently available.

Big business is also crypto-keen. Shinhan, one of the country’s biggest high street banks, is set to build a network of bitcoin vaults that it hopes to have operational by next year. Shinhan rival Woori is also active. In August, the bank unveiled plans to produce its own WeeBee Coin currency “by the end of the year” – although it is yet to come good on this front.

And perhaps the biggest piece of digital currency news to come to light this year in Korea came when digital giant Kakao (which incorporates not only the KakoaTalk chat app, but also the Daum search engine) announced it was teaming up with Bittrex to create a giant new exchange platform.

All across the country, digital currency-based startups are springing up fast. These include a pizzeria that accepts payments in its own gold standard-based crypto currency, Snoocoin. The eatery’s latest promotion involves offering its customers free Snoocoins that they can either trade for gold…or pizza.

Mainstream interest

Regulations alone may not be enough to stop the advance of bitcoin & digital currencies in Korea. But in a country that was badly burned by the Asian Financial Crisis in 1989, many remain deeply skeptical about anything investment evangelists or government economists entice them with – or warn them off.

For some, hopes remain high. The fact remains that no matter if the party is “over” or just getting started, digital currency has now made it to the mainstream consciousness in South Korea. Many have banked all they have on the future of digital currencies. Even if the bubble bursts in the weeks ahead, the whole country’s attention has been piqued – leaving an entire nation poised on the edge of its seats.

Featured image by JoopDorresteijn (CC by 2.0)

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Writer for the BBC, The Guardian, The Jewish Chronicle, Korean Air’s MorningCalm, Chosun Ilbo, Weekly Chosun, Kyunghyang Shinmun, Essen, The Korea Times, Joongang Ilbo, Korea IT Times and many others.

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