On a day when Bitcoin briefly collapsed to $ 30,000 in a frenzied bear market, the leading cryptocurrency never came close to that of Korean exchanges. The said “kimchi bountyEnsured this, by keeping the price of Bitcoin up to $ 5,000 above its level on major US exchanges.
The main reason for this kimchi bounty is that Korea’s trade is quite isolated by a combination of the country’s strict capital control laws preventing funds from leaving the country, and the tax code and anti-money laundering regulations. money (LBC) that make it difficult for foreigners. to use Korean stock exchanges – even giants like Bithumb and Upbit – without local Korean bank accounts.
This bounty isn’t the only part of the South Korean crypto industry that sets it apart from the rest of the world, either. Among other things, the isolation of the market combined with the extraordinary stability of the Korean won has kept the use of stable currency low and the adoption of decentralized finance, or DeFi, far behind that of the rest of the world. .
The Bitcoin Boom in Korea
Despite this isolation, Korea’s adoption of Bitcoin in particular and cryptocurrency in general is very strong. As of April, more than five million unique cryptocurrency users – roughly 10% of the nation’s population – are believed to have bought or sold digital assets at least once since the start of 2021.
On May 19, the day the kimchi premium hit $ 5,000, a single Korean exchange, Upbit, had a 24-hour trading volume of over $ 31.5 billion, according to CoinMarketCap. Add in the rest of the country’s ‘big four’ cryptocurrency exchanges, Bithumb, Korbit, and Coinone, and it stood at $ 38.1 billion – far more than what was recently traded on Korea’s main exchange KRX. .
An interesting aspect of the Korean cryptocurrency craze is the way it is spread between age groups. February investigation showed that nearly half of the users of major Korean exchanges Bithumb and Upbit were in their 40s or 50s, many of whom were mothers. Having said that, a larger survey Korean crypto exchange apps in March showed that young people dominate the ranks of new Korean crypto users, with those in their 20s and 30s making up almost two-thirds of new monthly app users in the first three months of the year. However, they invest small amounts, often less than $ 100.
All of this clearly has an impact. Bithumb Korea recently announced that its Q1 2021 net profit increased 876% over the previous year.
At the same time, the Korean government and regulators are far from being fans of cryptocurrency. In February, the Governor of the Bank of Korea, Lee Joo-yeol Told a committee of the National Assembly heard that “a crypto asset is an asset which has no intrinsic value”. He added that “it is difficult to understand why the price of Bitcoin is so high.”
Korean crypto regulations also make it difficult for foreign competitors. In December 2020, the world’s largest exchange, Binance, closed its Binance Korea operation less than a year after its launch, largely thanks to a law that prohibited exchanges operating in the country from sharing order books – meaning Binance Korea could no longer look into Binance’s liquidity.
This law went into effect in March 2021, the same month that another leading cryptocurrency exchange – OKEx – announced it was shutting down its operations in Korea due to new AML regulations. It has also been suggested that these rules will make it difficult for the small Korean exchanges to compete with the big four.
You are not a fan of stablecoins?
Despite this booming crypto market, Korea lags far behind the rest of the world when it comes to the adoption of stablecoins, largely because the Korean won is stable enough that there is no such a strong need for stablecoins in the largely closed crypto market. .
Beyond that, the Korean government is frowning on stablecoins, according to Oleg Smagin, head of global marketing at Delio, a leading Korean crypto lending and staking company. This makes exchanges suspicious of them, he adds.
In addition, the exchange fees are low – widely between 0.15% and 0.25% for the big four. While the won withdrawal fee is fixed and very low – around $ 1 – the cost of moving cryptocurrencies directly can be high. The big four withdrawal fees range from 0.0005 to 0.0015 BTC for withdrawing Bitcoin directly – $ 20 to $ 60 for a $ 40,000 BTC.
Which might help explain why the Korean won is the fourth most traded national currency for Bitcoin, behind only the dominant Japanese yen, euro and US dollar.
The CeFi-DeFi hybrid
One of the casualties of Korea’s closed crypto market and the lack of awareness of stablecoins is that the burgeoning DeFi industry has not had a chance to gain a foothold there, Smagin says.
“2019 became a tipping point for widespread adoption of DeFi around the world, but in Korea it was barely recognized, mainly because most local investors lacked experience in using crypto services at abroad and that the adoption of stablecoins was low, ”he said.
Delio’s solution is a centralized-decentralized hybrid funding model that uses CeFi as a means to build the initial crypto lending ecosystem that will become increasingly decentralized over time. In the meantime, the company realized there was a “huge niche for a CeFi crypto-crypto lending service that can meet the needs of local traders,” says Smagin.
The company currently offers four CeFi loan offerings, as well as a new payment service that allows Delio wallet holders to pay with Bitcoin on a network of more than 70 retail business services through the payment app. Money Tree. In addition, it is Liquidity Delio arm offers digital asset loans ranging from $ 800,000 to $ 45 million to institutional clients.
Delio offers Bitcoin and Ethereum loans up to 90% of the borrower’s BTC or ETH collateral, and also provides lending services to Bithumb customers, which can use BTC or ETH, or Korean won, as collateral. Staking and yield farming are also available. Delio recently exceeded $ 2 billion in total used value.
Delio’s DeFi hybrid plans focus on Ducato, a earnings-based stablecoin project slated to launch in the third quarter of 2021. The KRWD stablecoin – pegged at one won – will be generated by collateralizing the cryptocurrency. Ducato is a DeFi protocol with its own token, DUCATO, which is used to pay fees and for governance. But the CeFi Delio platform provides the stablecoin with a user-friendly interface.
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