South Korea

History Of Cryptocurrency In South Korea

In South Korea, local prices of cryptocurrency exchange are significantly higher than those in the western countries and even higher than in China. Price premium in Korea is called “KimChi Premium.” The first report of KimChi Premium and cryptocurrency frenzy in South Korea came from CNN on December 12th, 2017. From the beginning, it wasn’t always like this. Prices of cryptocurrency in South Korea were the same as it were in other countries in the world back in early 2017. This difference came to be 30% higher at the end of 2017, while in January 2018 it set a new record and went sky-high up to 50% higher than in other countries. [1]

Legal Status Of Cryptocurrency In South Korea

The South Korean government still haven’t decided if cryptocurrency is “goods” or a “financial currency.” Both of those possibilities bring complications either way because the goods are under the jurisdiction of “Foreign Trade Act” (FTA) and “Customs Law” (CL) and goods needs to be reported either as import or as export to Customs. Currency, on the other hand, is under control of the “Foreign Exchange Transaction Act” (FETA). This law explains that all the individuals who wish to import cryptocurrency need to declare their trade to the Korean Bank, but still, there are no regulations about it. [1]

The South Korean government officially legalized Bitcoin service providers to facilitate payments, trades and transfers in July 2017 which was the cause of massive growth in demand for cryptocurrency in the country. After the August 2017 when supposedly North Korean hackers targeted South Korean Bitcoin exchanges, at the beginning of September 2017, there were rumors in South Korea that the country is planning to set stringent regulations of digital currencies. By December 2017, these rumors came to be much more severe based on speculations that this will lead to the total ban on cryptocurrency exchanges. By this time, South Korea already has the higher volume of cryptocurrency trade than China. From the start of 2018, the South Korean government announced that regulatory plan is to ban anonymous cryptocurrency trades to control the speculation of cryptocurrency. [2]

Tax Status Of Cryptocurrency In South Korea

Taxation of cryptocurrency transactions in South Korea still doesn’t exist since there are no regulations regarding this matter. By the current law, citizens are allowed to profit millions of WON from crypto transactions without being obligated to pay taxes on their income. Selling the stocks in South Korea will be taxed 0,3% for listed securities and 0,5% for unlisted ones. Considering the cases of “Major Shareholder,” there are obligations in paying due tax on capital gains as well as the unlisted shares also pay taxes on capital gains. Tax authorities set the First National Tax Administrative Reform Committee in 2018 as a virtual currency taxation standard. A schedule was set up by The Ministry of Strategy and Finance for the first half of this year about the cryptocurrency taxation. Since the media reported that the imposition of cryptocurrency in South Korea would start in June 2018, an official from the ministry replied that the specific time frame is not set, yet and that they are thinking of bringing new regulations regarding taxation of cryptocurrency in the first half of this year. He also added that they still need to speak to National Tax Agency to come up with a plan whether to tax the exchange services and how and to determine the exact tax rates. [3]

Exchange And Local Exchange Of Cryptocurrency In South Korea

Exchanging cryptocurrencies in South Korea is possible by using some of the international exchange providers as well as the local ones. We’ve gathered the required information to set up a list of both.

International exchange providers such as Coinmama allows customers in almost any country to purchase Bitcoin with a credit or debit card. Their fee is approximately around 6% from every purchase. Identity verification is not needed if your purchase isn’t bigger than 150$. It makes small purchases quick and easy. Coinmama has the highest limits in buying Bitcoins with a credit card and is very reliable and trusted broker. The downside is that it has the highest fees among the credit or debit card Bitcoin brokers.

LocalBitcoins is an escrow service that helps matching sellers and buyers. It is very fast, easy and private. Cash deposit is the most common method of payment.

Bitcoin ATMs can be found everywhere. Using the Bitcoin ATM map will ensure you’ll find the closest ATM to your current location. The upside of using the Bitcoin ATM is that it doesn’t require any identification and you can purchase Bitcoins using cash. The downside of Bitcoin ATMs is that when buying Bitcoins with money, the fee is between 5-10%. There are also others exchanges like Mycelium Local Trader who will help you to find local Bitcoin sellers. Once the pairing is complete and the seller is located, the buyer will meet with the seller in-person to finish the trade. Mycelium doesn’t take any fees for their services. While this way of business has excellent response in significantly populated areas, it is troublesome in less populated areas to match buyers and sellers. Changelly allows you to buy Bitcoin by using Litecoin, Dogecoin or other digital tokens. Changelly works in almost any country, but to buy Bitcoins, you’ll need to pay for them with some other virtual currency. The exchanges are instantaneous since Changelly is not controlling your coins, it is only exchanging them. Bitcoin-OTC is described to be something like Craig’s List for trading the Bitcoin. Users are required to make ads to find sellers. Bitcoin-OTC might be hard to use, but it also might be the only way of buying cryptocurrency in some countries, therefore, the only option at all. Many other exchange providers are also offering possibilities to buy Bitcoins and exchange them at your will. Certain fees and rules may apply. Thoroughly researching your options before making a purchase is advisable.

Bithumb is South Korea’s mostly used cryptocurrency exchange provider and one of the most significant cryptocurrency exchanges in the world. Some of the digital currencies that got their value increase after being added to Bithumb were Ripple and Monero. There are many other cryptos available for trading using Bithumb exchange. Some of them are Bitcoin Cash, Ethereum Classic, Litecoin, and Dash. At one point in June 2017, Bithumb had most of the daily cryptocurrency exchange than any other trade. During June 2017, the exchange was hacked leaving over 30.000 of its customers compromised. Around three-quarters of all Bitcoin trading volume in South Korea comes from Bithumb exchange. Cryptocurrencies listed at Bithumb are paired with Korean Won.

Korbit is the largest and the first exchange provider in South Korea, based on the trading volume. Bank transfer is the only method for making a deposit. Korbit fees are amazingly low. Market makers have 0% fee, and market takers pay the fee of 0,2%.  The buying price is close to market rate which is ensured by Korbit’s deep liquidity. Korbit has multi-sig security features and offers a remittance service. Although its user interface (UI) is not user-friendly, the first-timers will have a hard time finding their way around. Single payment method is another downside of Korbit, as well as the e-wallet that they are offering which should not be used for storing Bitcoins.

CoinPlug is a Bitcoin exchange provider from South Korea. Buying Bitcoin can be made by making a bank deposit to one of its virtual bank accounts. CoinPlug operates as well with the okBitcard service allowing customers to purchase Bitcoin vouchers from any 7-11, Mini Stop or Nautilus ATM throughout entire South Korea. You can choose between purchasing vouchers worth 10.000, 30.000 or 50.000 Won. Upsides of CoinPlug are that you can buy Bitcoins with an as little fee as 0,1%. It also allows you to use investment and technical advice from some huge and influential names in this business. Using okBitcard will enable you to buy Bitcoins quick and easy at over 32.000 spots throughout entire South Korea. Utilizing the okBitcard to purchase your Bitcoins requires only a phone number making it quite a private buying method. On the other hand, exchange trading is not private since it requires identity verification. The user interface is somewhat confusing, making it harder for the first-timers to find their way around. The virtual bank account that the exchange uses is valid only through 24 hours period which might lead to complications in the event of payment delays. [4]

Use Of Cryptocurrency In South Korea

South Korea’s favorite Bithumb exchange provider is making a partnership with digital payment provider Korea Pay Services (KPS) to allow crypto users to use their cryptocurrency for buying and making payments in shops, cafes and other partners in this newly found program. Considering that South Korea is the third country in the world by the usage volume of cryptocurrency, just behind the U.S.A. and Japan, it is expected for South Korea to do more in regulating and validating the use of crypto in their country. Since December 2017, to be able to use crypto in South Korea, you must be fully nationalized citizen of South Korea. In addition to that, the government officials are not allowed at all to own or trade any cryptocurrency, while anonymous trading has also been banned within the borders of the country. Fully established users of South Korea can only make transactions. For now, this new partnership between Bithumb and KPS will allow users to buy and shop in more than 6000 stores and shops. [5]

Organizations, Companies And Local Cryptocurrency In South Korea

A Korean travel website Innovation Corp that lists over 50.000 different hotels and vacation rentals joined forces with the officials in South Korea and established a profound partnership with the government to allow its citizens to fully pay for their accommodation by using some of many dozens of different cryptocurrencies. [5]

A South Korean blockchain industry organization has proposed a framework that’s self-regulatory to set the standards for cryptocurrency exchange industry in the country.

NHN Entertainment Corporation, a $1,2 billion company, founded in 2013 used to operate under the name Hangame Communications from 1999 to 2013. NHN is one of two biggest gaming conglomerates in South Korea next to Nexon. These two companies have a market evaluation of well over 1,29 trillion Korean Won.

South Korea’s most significant telecommunication company SK Telecom which is evaluated to a worth of $17 billion was the first major investor in Korbit including the billionaire investor Tim Draper. NXC being the father firm of Nexon purchased 65,19% of Korbit, since SK Telecom and Tim Draper wasn’t willing to sell their shares of Korbit. [6]

References:

1. “KimChi Premium. The hidden history of cryptocurrency in South Korea,” Santiment Content. Published January 28th, 2018. Retrieved May 20th, 2018.

2. “South Korea and Crypto Regulations, Explained,” Chrisjan Pauw, Coin Telegraph. Published February 06th, 2018. Retrieved May 20th, 2018.

3. “Crypto still tax free in Korea but regulators have set the timeframe for taxation,” Kevin Helms, Bitcoin.com. Published March 31st, 2018. Retrieved May 20th, 2018.

4. “Buy Bitcoin in South Korea,” Buy Bitcoin Worldwide. Published Unknown. Retrieved May 20th, 2018.

5. “Citizens of South Korea will be able to pay in cryptocurrency at over 6000 stores,” Nick Marinoff, Bitcoin Magazine. Published March 28th, 2018. Retrieved May 20th, 2018.

6. “South Korea’s Largest multi-billion-dollar conglomerates enter the cryptocurrency market,”Joseph Young, Coin Telegraph. Published March 26th, 2018. Retrieved May 20th, 2018.