Zhitong Finance APP learned that after the U.S. consumer price index (CPI) in April showed that inflation slowed from the previous month, the price of bitcoin performed strongly in the stock market rally on Wednesday. According to Coin Metrics, the price of Bitcoin jumped more than 7% to $66,124.59, its best one-day performance since March 25, and broke above the 50-day moving average for the first time since April 13. However, long before the global crypto boom drove prices to record all-time highs in early 2024, South Korean retail investors poured into current digital asset exchanges.
According to the semi-annual report of the Korea Financial Intelligence Unit (KOFIU), the number of active users of South Korea's registered exchanges increased by 390,000 to a total of 6.45 million by the end of 2023, accounting for more than 10% of the country's total population. Among them, 99% are individual investors, and nearly 60% are between the ages of 30 and 40. During this time, South Korea's average daily crypto trading volume increased by 24% to 3.6 trillion won ($2.6 billion), while the total value of cryptocurrencies held on registered exchanges soared by 53% to 43.6 trillion won.
It is worth mentioning that despite the collapse of TerraUSD, a stablecoin created by South Koreans Do Kwon, in 2022, the enthusiasm for cryptocurrencies in South Korea has not waned. A major political party pledged in last month's parliamentary election that South Koreans would be allowed to use U.S. bitcoin ETFs.
In the first quarter of 2024, the South Korean won surpassed the US dollar to become the world's most traded currency in crypto assets. Upbit, South Korea's main exchange, is sometimes among the top five exchanges in the world due to its large trading volume. KOFIU noted that the number of crypto trading users also rebounded due to the increase in trading volume, market capitalization, exchange operating income, and KRW deposits compared to the first half of the year, as the price of cryptocurrencies rose and investor sentiment recovered.
Figure 1
As a result, from July, South Korea will implement the Virtual Asset User Protection Act, which imposes stricter requirements on exchanges and increases penalties for misconduct. The law could inadvertently strengthen Upbit's grip on the South Korean market. Upbit is the largest exchange in South Korea, accounting for more than 80% of the country's total trading volume, and occupies an unrivaled dominance among global exchanges. Last year, Upbit's customers accounted for almost one-fifth of the total deposits of its major banking partners.
Figure 2
Simon Seojoon Kim, CEO of South Korean venture capital firm Hashed, said that complying with the new regulatory requirements could be costly, and that it would be easier for resource-rich exchanges such as Upbit to meet the new standards. Smaller exchanges face greater challenges.
Even Crypto.com was scheduled to go live in South Korea, but it was postponed due to the need for more communication with regulators. Previously, there were reports that the Financial Intelligence Unit had found concerns in the documents submitted in connection with anti-money laundering.
It is understood that Upbit is operated by Dunamu Inc., a fintech company, and since its launch in 2017, it has accounted for nearly 5% of the total global cryptocurrency transactions. Dunamu was founded by Song Chi-hyung and Kim Hyoung-nyon, former executives of mobile payments company Danal, and is backed by South Korean internet giant Kakao Corp. Upbit has gained an early advantage by partnering with Kakao, where traders can sync their KakaoTalk and Upbit accounts for seamless onboarding.
Figure 3
Despite the many challenges, South Korea's cryptocurrency market remains vibrant, attracting the attention of global exchanges.