Seoul, SOUTH KOREA – It’s no big secret that South Koreans are crazy for crypto, but the South Korean government on the other hand has had a patchy relationship with the digital assets at best, banning initial coin offerings (ICO) since September last year. And although there are growing signs that South Korea may lift the ban, with the National Assembly lobbying the government to back down from its previous position on ICOs, billionaires from Seoul to Jeju have not been letting their government get in the way. As the world’s third largest market for Bitcoin last year, the South Korean won being the third most traded currency for Bitcoin in the world, it’s no wonder that some of South Korea’s richest and most influential are also pouring into the cryptosphere. With three of the world’s top five exchanges for Ethereum accounting for more between 35 percent and 40 percent of global trading, Forbes Asia estimates that an estimated 3 million South Koreans in a country of only 50 million people had set up cryptocurrency trading accounts by the end of last year.
South Korean’s insatiable appetite for cryptocurrencies, coupled with financial regulations which make it cumbersome to send won overseas has led to a 30 percent to 50 percent premium on the purchase price of major cryptocurrencies such as Bitcoin and Ethereum, a phenomenon colloquially referred to as the “Kimchi Premium.” According to Ki Hoon Hong, assistant professor of finance at Hongik University, much of South Korea’s cryptocurrency demand was from nearby China, where cryptocurrency trading is completely banned, using South Korea as a convenient conduit to sell cryptocurrencies for government issued currencies such as dollars, yen and euro.
With South Korean investors fatigued by the poor investment returns in real estate caused by rising interest rates and tougher certification requirements to trade in stocks and derivatives such as options, many took to cryptocurrencies instead. Plus, with the tech-heavy Kosdaq fall 6 percent in 2016, many investors went in search of better yields and found it in cryptocurrencies. According to professor Hong,
“A lot of active funds were not performing very well, and that led to a lack of high-risk assets that were investable in the domestic market.”
“The preference for risk in the market supplies liquidity in Bitcoin.”
Given South Korea’s high smartphone penetration, as well as the population’s familiarity and comfort with mobile money transfers, cryptocurrencies were an easy extension of South Koreans’ digital tool kits. Despite that prices of cryptocurrencies are well down from their highs last year, many South Koreans continue to see value in the digital assets, a view which has been held by South Korea’s leading companies and banks which continue to invest in both cryptocurrencies and blockchain, the technology which powers cryptocurrencies and has myriad other applications.
Game makers such as Nexon, Smilegate, Netmarble and NHN Entertainment, all household names for some of the biggest mobile gaming titles in South Korea, have poured into cryptocurrencies to replace their in-game currencies. Cryptocurrencies are a natural fit for these game makers as the digital tokens allow users to easily purchase game items and make transactions more transparent thanks to the blockchain. With game makers keen to curb speculation on digital game items such as rare weapons and armor, digital tokens represented a perfect solution. The other advantage was that now players could also easily swap in and out of a game maker’s digital tokens for highly liquid and convertible cryptocurrencies such as Ethereum and Bitcoin. According to Netmarble chairman Jun-hyuk Bang, who said in February this year,
“The connection between games and cryptocurrency is huge.”
Bang notes that if cryptocurrencies could only be used to buy game items and players had to swap fiat currency such as won or dollars purely for the digital token, players would stop buying in-game items. But because game makers are able to provide digital tokens that can readily be converted into cryptocurrencies which can then be swapped into cash, with minimal slippage (conversion fees are much lower than foreign exchange rate conversions in fiat currency), players are more ready to buy digital items in-game. So who are the richest in South Korea who are in the know and ready to swap some of their physical cash for real digital value? Forbes Asia tracks the top seven.
1. Jung-Ju Kim (No. 5)
Kim personally holds an 83 percent stake in Korbit, South Korea’s first cryptocurrency exchange through a holding company NXC. But although Korbit may have been around for awhile, Kim only took his first plunge into the crypto pool last September, paying an eye-watering US$85 million for an initial 65 percent stake, valuing Korbit at US$135 million at the time. With initial coin offerings (ICO) banned by the South Korean government last September, Kim’s timing was bordering on perfect, just before cryptocurrency prices roared to unimaginable highs last winter. Although prices of Bitcoin and Ethereum have since descended back to earth, optimism is still high, with the South Korean won still the world’s third most traded fiat currency for Bitcoin. Kim made his fortune in games and co-founded South Korea’s largest game maker Nexon. His stake in the 24-year-old holding company of Nexon, NHC, puts him as the fifth richest person in South Korea to dive deep into cryptocurrencies. As part of the initial wave of digital entrepreneurs who satiated South Korean’s insatiable appetite for Korean gaming titles, Kim sees the value in blockchain and cryptocurrencies to support his gaming empire. And with clear evidence that South Koreans are more than willing to shell out fiat currency for digital game items, there’s sufficient reason to believe that they will take to cryptocurrencies like fish to water.
2. Hyuk-Bin Kwon (No. 8)
With cryptocurrencies, especially those issued by way of an ICO a perfect match for millions of South Korean gamers, Kwon’s mammoth gaming company Smilegate has forged a partnership with local blockchain company theloop to develop a cryptocurrency for its gamers to use. Smilegate is creator of the game CrossFire, the world’s top online first-person-shooter game with over six million concurrent players across the globe. Kwon’s investments in digital technologies and current foray into cryptocurrencies have made him a rich man, with Forbes Asia estimating his net worth to put him at No. 8 on its list of the richest South Koreans.
3. Jun-Hyuk Bang (No. 9)
Bang, who also happens to be No. 9 on Forbes Asia’s list of the richest South Koreans said in February that his gaming company Netmarble will “explore” blockchain technology. Because blockchain technology would have myriad applications for gaming companies such as Netmarble, many have speculated that Bang will create his own cryptocurrency for Netmarble’s games. But with ICOs banned in South Korea since September last year, Bang may be biding his time as reprieve may be in sight. Last week, South Korea’s highest lawmaking body, the National Assembly put forward a proposal to the South Korean government to lift the ban on ICOs, citing that some of South Korea’s most promising cryptocurrency and blockchain companies were fleeing for more friendly jurisdictions such as Singapore and Switzerland.
4. Beom-Su Kim (No. 13)
At number thirteen on Forbes Asia’s South Korea rich list, Kim owns almost 22 percent of South Korean fintech startup Dunamu, which last October launched what has become South Korea’s biggest cryptocurrency exchange, Upbit. Kim is synonymous with South Korea’s most ubiquitous chat app, KakaoTalk, a free mobile instant messaging application for smartphones with free text and free call features. Upbit has not been without controversy, with South Korean prosecutors raiding the offices of the cryptocurrency exchange in early May this year on allegations that the exchange was selling cryptocurrency that it did not actually hold to customers. Upbit survived the raid and continues to attract new customers daily, much to Kim’s delight. Kim represents serious money in the cryptocurrency space and is South Korea’s thirteenth richest person according to data publicly obtained by Forbes Asia.
5. Joon-Ho Lee (No. 35)
At No. 35 on Forbes Asia’s list of the wealthiest South Koreans, Lee’s NHN Entertainment, a South Korean developer, publisher and distributor of mobile and PC games, backed OKCoin’s launch of a cryptocurrency exchange in January. OKCoin was China’s biggest cryptocurrency exchange before Beijing pulled the plug on cryptocurrency trading last year. But that hasn’t stopped South Korean companies like OKCoin from profiting off China’s ban. South Korea has long served as a conduit for Chinese cryptocurrencies pouring into the company and swapping the digital assets for fiat currency and vice versa, leading to higher fiat to cryptocurrency prices than anywhere else in the world and often referred to as the “Kimchi Premium.”
6. Sang-Hyuk Lee (No. 40)
Lee’s Yello Mobile, an incubator and investor in apps bought 52 percent of DAYLI Financial Group for US$105 million last year. On Forbes Asia’s list of the richest South Koreans, Lee sits at number forty and has an estimated net worth of US$1.05 billion, based in large part on his 26 percent stake in the country’s second biggest unicorn, Yello Mobile. DAYLI owns Coinone, DAYLI Intelligence, Nomad Connection and theloop, which is also working with Kwon’s Smilegate to develop a cryptocurrency for their mobile games. DAYLI Intelligence is also maker of Icon which operates on top of theloop’s project, a working production blockchain serving real world business partners from financial services to insurance.
7. Hae-Jin Lee (No. 48)
Lee’s Naver, South Korea’s leading search engine, invested US$300 million into blockchain technology in the first quarter of this year. Naver is synonymous with South Korea’s mobile messenger Line, the equivalent of China’s WeChat and which allows for free, instant communications on electronic devices including smartphones, tablets and personal computers. Lee sits at No. 48 on Forbes Asia’s richest South Koreans. Interestingly, Lee’s Naver used to run Hangame a South Korean gaming company which is now overseen by Joon-Ho Lee’s NHN Entertainment.
But it’s not just tech stars who are pouring into cryptocurrencies, traditional South Korean conglomerates or Chaebols have also been investing in the space. Samsung’s technology arm recently announced that it would be leveraging the blockchain for financial services and Hyundai even has a cryptocurrency mining pool called HDAC. As more traditional investors and money start to recognize the value of the blockchain, that interest will inevitably spillover into cryptocurrencies as well. If the blockchain is the body of the technology then cryptocurrencies can be viewed as the lifeblood of the ecosystem, something which a leading South Korean academic has pointed out – that the blockchain can’t be separated from cryptocurrencies.
Many of South Korea’s very richest on Forbes Asia’s list of the very wealthiest made their money in technology and not to be outdone by the latest technological developments, are pouring into cryptocurrencies and blockchain technology as well.