Why are young Koreans diving into a crypto frenzy?

[박석홍]

Why are young Koreans diving into a crypto frenzy?

Posted : 2021-05-11 17:02

Updated : 2021-05-11 17:05

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Young people's investments in virtual assets mirror their anxieties about the futureBy Jung Da-minPark Min-soo, 25, a college student in Seoul, has recently bought Dogecoin, a meme-based cryptocurrency.Whether it is a small or large amount of money, many of her friends, including herself, are investing in various kinds of cryptocurrencies.But as the cryptocurrency market is unpredictable, they often buy one randomly, rather than based on specific, detailed analyses."Buying cryptocurrency has become a trend among our generation. We make a joke about randomly buying a type of cryptocurrency. We say, 'If you drink milk, then you should buy Milk Coin. If you made an online comment in reply to something, then you should buy Ripple Coin," Park said, referring to the names of two different kinds of cryptocurrency.While some young people invest in cryptocurrencies with a relatively small amount of money simply to learn about the new investment market, there are also others who try to earn large returns by investing a relatively large amount."I heard from my friend that his friend recently lost 10 million won ($8,980) that he borrowed," Park said, adding that it was a big loss for a college student without any regular income.

A woman looks at the prices of virtual currencies displayed on an electronic billboard in the Upbit Lounge in southern Seoul, Monday. Yonhap

Yee, 28, a government employee from Seongnam, Gyeonggi Province, said many of his friends invested a relatively large amount of money in cryptocurrencies ― considering their income levels ― anywhere from 100 million won to 400 million won.But Yee said he has neither invested in cryptocurrencies, nor is he planning to do so, as he believes buying them is too risky.Although many young people share a similar view to Yee's, a growing number of people in their 20s and 30s are opting to invest in digital coins.According to data from the nation's top four cryptocurrency exchanges ― Upbit, Bithumb, Coinone and Corbit ― about 1.58 million people in their 20s and 30s newly entered the market during the first quarter of this year, accounting for 63.5 percent of total new users during that period.

A man checks the prices of virtual currencies displayed on an electronic billboard in Bithumb's customer center in southern Seoul, April 27. Yonhap

Young people say the cryptocurrency boom among them reflects the structural problems of Korean society, in which housing prices are soaring and most young people cannot buy a home with their regular job income ― and many young people cannot even get regular jobs."As young people living in Seoul, we will not be able to purchase a house like that owned by our parents, unless we never spend money on anything and rather just save money for three decades," said Lee Jae-yeon, 25, from Seoul."If we go along the path determined for us by society, we will not be able to buy a house in our lifetime. So, many of us are choosing to take a different path by investing in cryptocurrencies. Although not yet designated by the government as a new asset class, they could bring bigger returns, if successful."Lee said the younger generation has been taught by the older generation that there would be due compensation in accordance with their efforts, which was true for those growing up during the nation's rapid growth and development period. But the situation is totally different today, he said."Such a mismatch between what we've been taught to believe and reality has sparked protests among us," he said.Reacting to the desperate roots of the youth boom in crypto investing, Financial Services Commission (FSC) Chairman Eun Sung-soo said last month, while warning about the high volatility of cryptocurrencies, that older people "should guide young people in the right direction if they are on the wrong path."This comment drew an immediate backlash from young investors. A person who identified himself as an office worker in his 30s filed a petition on the Cheong Wa Dae website demanding Eun's resignation, which gained more than 40,000 signatures in a day."It seems that the FSC head himself has gained profits through real estate investment. While the older generation has gained wealth through real estate investment, they say young people should stop investing in cryptocurrencies because that is speculation," the petitioner wrote.Young people also say that it is time for the government to acknowledge cryptocurrencies as real currencies and introduce relevant regulations or laws for those investing in the market.The government's stance that it will impose a tax on the profits from crypto investments, but will not introduce protection for crypto investors, also brought out a strong reaction from the investors.While the government is planning to levy a 20 percent (other) income tax on cryptocurrency transactions starting next year, it has not come up with proper systems or regulations on the market, which means that there is no safety net for investors.

An illustration of the virtual currency, Ethereum, from Feb. 19. Reuters-Yonhap

Cryptocurrency experts advise that the government should acknowledge virtual currencies as a new type of financial or investment instrument."The trend of investing in the cryptocurrency market among young people signals the advent of the digital era, in which transactions of cryptocurrencies will gain more stability," said Park Sung-jun, the director of Dongguk University's Blockchain Research Center."In the past, other new, growing businesses, like internet start-ups and the related venture capital companies in the 1990s, had speculative elements but the government implemented support policies for them. The government should also acknowledge cryptocurrencies as an upcoming industry of the future."Kim Hyung-joong, a professor at Korea University's School of Cybersecurity, said he thinks the crypto boom will lead to cryptocurrencies playing a key role in decentralizing the country's financial market and the younger generation is accelerating this."I think young people can learn a lesson from this newly-emerging financial industry sector by buying and selling digital coins," he said.