In South Korea, Bitcoin is a household name. Back in 2017, this nation of over 50 million people accounted for 20% of all Bitcoin transactions and was the largest market for Ethereum. Students checked Bitcoin prices during breaks, office workers traded while waiting for coffee, and even the elderly participated from home.
The frenzy peaked when local Bitcoin prices soared 40% above those on U.S. exchanges, a phenomenon so extreme that Coinmarketcap excluded Korean prices from its listings. This became known as the "Kimchi Premium."
Although government crackdowns in 2018 eliminated this premium by enforcing real-name bank accounts for crypto trading and banning ICOs, the enthusiasm for cryptocurrency never faded. By 2022, South Korea ranked third in Bitcoin trading volume, capturing 8.7% of the global market, behind the U.S. (69.8%) and Japan (11.3%).
Many attribute this fervor to Korea’s rapid adoption of new technologies, but the roots go deeper—into culture and narrative.
Understanding Korean Culture: The Miracle on the Han River
The Korean War (1950–1953) left South Korea as one of the world’s poorest nations. By 2023, it had transformed into one of the wealthiest. This rapid growth stemmed from the influence of family-run conglomerates (chaebols), an export-oriented economy, a hardworking labor force, and a national mindset geared toward speed and efficiency.
This "ppalli-ppalli" (hurry-up) culture permeates daily life. Food delivery is expected to be quick, trains arrive on time, and buildings are erected within weeks. The desire to get rich quickly is no exception.
However, achieving wealth has grown more challenging. Since 2012, economic growth has slowed to around 3%, down from the double-digit rates of the early 2000s. Conventional investment avenues like stocks or real estate are not accessible to everyone.
With real estate prices high and interest rates rising, the appeal of property and domestic stocks has waned. Derivative trading has strict certification requirements, and the tech-heavy KOSDAQ index has shown little growth since 2011.
For many, the alternative has long been gambling.
The Allure of Quick Wealth: Gambling
The problem? Gambling is largely illegal in South Korea. Lotteries, horse racing, boat races, cycling bets, and casino gambling are prohibited—even for Koreans traveling abroad.
According to the Korea Center for Gambling Problems, established by the government in 2012, the prevalence of gambling addiction in Korea is two to three times higher than in other major countries. While the accuracy of these statistics is debated, the widespread social theory that Koreans are particularly susceptible to gambling addiction has influenced legislation.
With other investments limited, cryptocurrency emerged as a viable—though risky—path to quick wealth. Many Koreans view crypto exchanges as a form of gambling, offering the chance to make large sums in short periods.
In the West, narratives like "banking the unbanked" or "Bitcoin as digital gold" dominate. But in Korea, where trust in the financial system is high, these stories hold less sway. After all, gold doesn’t surge 100% in a day.
But altcoins can.
To keep traders engaged and adrenaline pumping, local exchanges became specialists in meeting demand. For instance, while listing a token on a major exchange always attracts retail investors’ attention, only in Korea does delisting present an equally compelling opportunity.
When a token is delisted, deposits are halted. With no new supply entering the market, speculators rush to drive up the price for one last gain before trading stops. Delisting notices generate as much—if not more—attention than new listings.
An even wilder spectacle is exchange maintenance. When deposits and withdrawals are suspended but trading remains active, it creates a closed market known as "muljil" (a net used to trap live fish). Like fish trapped in a net, traders can’t escape: arbitrage becomes impossible, and prices move independently of external markets. For gamblers, it’s a true feast.
This type of internal market trading is also popular in Korean stock markets, but crypto offers new avenues for such strategies. Some exchanges never even enabled cryptocurrency deposits or withdrawals, focusing solely on internal market trading.
Then Came Crypto Regulation...
Since 2021, exchanges must register with financial regulators. All are required to obtain an ISMS security license and offer real-name bank accounts—only five exchanges currently meet both criteria. Failure to comply can result in up to five years imprisonment or fines of up to ₩50 million.
Crypto regulations also imposed trading restrictions, mandating that every investor use a real-name bank account. This means Koreans must open an account at a bank that supports their chosen exchange. They are even required to report deposits and withdrawals to local CEXs when moving funds to private wallets or other exchanges.
The result? Hundreds of crypto exchanges were shut down. Today, only five hold real-name bank accounts. One of these, Gopax, was slated for acquisition by Binance, but reports indicate that South Korea’s Financial Services Commission is reviewing the deal following the SEC’s lawsuit against Binance.
Why DeFi Hasn’t Taken Off in Korea
Given these regulatory changes and the ongoing crypto bear market, one might expect the gambling-like narrative of cryptocurrency to push Koreans toward DeFi. But despite efforts by major local blockchain companies, DeFi hasn’t gained the same traction in Korea as in the West.
Take Klaytn, Korea’s largest layer-1 blockchain, which boasts its own DeFi, NFT, and GameFi ecosystem. Backed by Kakao (often called Korea’s Facebook), with 53 million active users, Klaytn even has a wallet integrated into Kakao’s messaging app.
Yet, as of this writing, Klaytn hosts only 34 DeFi applications (per DefiLlama) with a total value locked (TVL) of $123 million. Respectable, but not indicative of widespread adoption.
Based on personal conversations with Korean crypto investors, only a minority show interest in DeFi. Even colleagues working at crypto exchanges express little enthusiasm; few are familiar with setting up a MetaMask wallet.
The reasons for avoiding DeFi vary, but key factors include:
- High Trust in Centralized Systems: In a society with strong faith in the financial system, the benefits of self-custody aren’t compelling enough. Major centralized exchanges like Upbit and Bithumb already provide sufficient trust.
- Usability Challenges: DeFi is harder to use—managing wallets, private keys, and transactions is seen as annoying. Most DeFi apps aren’t optimized for the Korean market.
- Gambling Mentality: Centralized exchanges offer enough excitement for those seeking quick wealth; there’s no need to gamble on decentralized platforms.
- Lack of Korean-Language Content: DeFi terminology is complex and primarily English-focused.
- Low Yield Appeal: Single or double-digit annual percentage yields (APYs) can’t compete with the allure of leveraged trading on CEXs (though derivatives are banned in Korea).
To gain deeper insights, I consulted two experts: Doo, COO of StableLab and Growth AVC Member at MakerDAO, and Garlam, Executive Partner at Momentum6.
Frequently Asked Questions
Why is cryptocurrency so popular in South Korea?
Cryptocurrency's popularity stems from a combination of cultural factors, including a national drive for rapid success ("ppalli-ppalli" culture), limited traditional investment opportunities, and high trust in technology. Many view crypto trading as a viable alternative to gambling, which is largely illegal.
What was the 'Kimchi Premium'?
The Kimchi Premium was a phenomenon where Bitcoin and other cryptocurrencies traded at significantly higher prices on South Korean exchanges compared to global markets. At its peak in 2017, this premium reached over 40%, driven by high local demand and capital controls.
Is cryptocurrency trading legal in South Korea?
Yes, but it is highly regulated. Exchanges must register with financial authorities, obtain security certifications, and integrate real-name bank accounts. Investors must use these verified accounts to trade, and strict reporting rules apply for withdrawals and deposits.
What are the biggest barriers to DeFi adoption in Korea?
The main barriers include language (most DeFi interfaces are in English), complexity of use (key management, transactions), cultural preference for trusted centralized entities, and the perception that CeFi offers sufficient yield and trading opportunities without the hassle.
Can DeFi ever become popular in South Korea?
Yes, but it requires targeted efforts. Localization of content into Korean, partnerships with established centralized platforms for easier onboarding, and educational campaigns that simplify DeFi concepts could gradually increase adoption. Success stories of Koreans profiting from DeFi would also significantly boost interest.
Are there any Korean-made DeFi platforms?
Yes, Klaytn is a prominent South Korean layer-1 blockchain that supports DeFi applications. However, overall adoption remains low compared to centralized trading. Other local projects exist but haven't yet achieved mainstream traction.
How has government regulation impacted crypto trading?
Regulation has made trading safer but more restrictive. It eliminated the Kimchi Premium, reduced the number of operating exchanges, and enforced stricter investor verification. This has pushed some activity toward compliant platforms while curbing excessive speculation.
Expert Insights: Overcoming the DeFi Hurdles
Question 1: Why is DeFi less popular in Korea despite widespread crypto adoption?
Doo:
Although Korean users show interest in DeFi lending and yield aspects, self-custody options like Ledger and MetaMask are not widely used. Additionally, most DeFi applications and websites are in English, creating a significant barrier.
Recent incidents like Haru Invest and Delio suspending withdrawals have pushed many users toward Korean-friendly CeFi platforms for "DeFi-like" lending and yield experiences.
Garlam:
I see three key factors:
- Structure: The traditional banking system has a rigid structure with clear guidelines, making the evolving nature of DeFi difficult for some to adopt. For example, some still struggle to use Google Chrome for banking because certain anti-hacking and authentication software only supports Internet Explorer. This rigidity pushes people toward familiar platforms like centralized exchanges.
- Busy Lifestyles: Koreans’ hectic work and social schedules limit their ability to keep up with DeFi’s rapid developments. Many are too busy or too complacent to invest time in understanding a field that requires constant learning—especially when information is in a foreign language and quickly becomes outdated.
- Timing: Engaging with DeFi often starts with high-risk, high-reward projects before moving to safer blue-chip DeFi. The time zone difference with the U.S., where most project updates occur, means many Koreans miss opportunities. Coupled with the need to monitor English news (not commonly used in Korea), this leads to poor initial DeFi experiences and hinders their ability to keep pace.
Question 2: What changes are needed for DeFi to gain adoption in Korea?
Doo:
Two main pathways (not mutually exclusive) can achieve this. One is becoming more "Korean-friendly" by providing local language materials and websites. The other is partnering with popular centralized entities.
For example, Coinone is one of the few major Korean exchanges that has integrated DeFi yield positions, allowing its users to benefit from DeFi yields. This is a step toward gradually guiding users to use DeFi directly in a non-custodial way.
Garlam:
It’s simple: Koreans need to make money from DeFi. Once they taste success, the frenzy will begin.
Question 3: What should DeFi protocols and communities do to attract Korean users?
Doo:
The approach varies by protocol. Products like options and insurance are complex and hard for most Korean users to grasp. Such protocols might find more success attracting users to trade their tokens rather than use their products.
For simpler DeFi products, marketing and accessibility are key. Marketing can be passive (translating websites into Korean, providing Korean guides) or active (participating in interviews, speaking at Korean events). Maintaining a Korean Telegram or KakaoTalk group could also help.
In terms of accessibility, protocols need to partner with Korean CeFi platforms that can offer DeFi products or with Korean-friendly crypto mobile wallet companies. Mobile wallets are the preferred method for accessing crypto in Korea.
Garlam:
Localization—Korea is a highly homogeneous market. Without a genuine Korean team operating within the country, it’s difficult to enter. KOLs and media are the preferred mediums for information exchange. Identifying good and bad actors in Telegram and Kakao groups, and educating group admins (even offering them promotion budgets) could yield the highest ROI for expansion.
Preconceptions—as mentioned, in times of uncertainty, people revert to default modes. Tokens traded on Korean exchanges allow familiarity with their names and price history. Once people gain some benefit from a token, they’re more likely to engage with its entire ecosystem.