In late 2017 to early 2018, South Koreans from traders to mom and pops were crazy about cryptocurrency. This is because many Koreans were making huge profits through Arbitrage. Basically, Koreans were buying cryptocurrency outside of Korea for cheap and selling them high on Korean cryptocurrency exchanges. They the buying price outside of Korea was lower than the selling price in Korea and this was what was called a Kimchi Premium. Bitcoin traders in Korea were paying close to 50% markup for bitcoin on local exchanges at its peak. This resulted in a high volume of trading in South Korea. The difference was so high that at one point, CoinMarketCap removed South Korean exchanges from its market cap index.  

Why Koreans are Crazy About Cryptocurrency?

Bitcoin in Korea

Many might not know this but Koreans cannot gamble in a casino in Korea. The only place they are able to gamble is a place called Kangwon Land, the only casino in Korea you can enter without a foreign passport. The Korean government has a majority stake ownership in the casino. It is 3 hours drive away from Seoul, which shows just how much the Korean government is worried about gambling additions for their Korean citizens.

For many Americans, they are free to go to Atlantic City, Las Vegas, or any of the thousands of local Casinos near their city. Koreans do not have this luxury. In a way what these Casinos give Americans is not just entertainment, but a small dream or hope for quick money. Koreans working in South Korea just work. Some even over 12 hrs a day. Most feel they are not getting what they deserve and more importantly, they are not doing what they like or dreamed of doing as a profession.

Asians like to Gamble 

The South Korean government probably knows this which is why they will not make gambling in Casinos legal in Korea. But not just South Koreans but Asians in general love to gamble. Proof of this is Macau which dwarfs Las Vegas and attracts Asian gamblers from China and all across Asia.

Cryptocurrencies gave many Koreans a chance to gamble without even leaving their homes. Add this to the Kimchi Premium and you can understand why so many Koreans got into cryptocurrency so quickly. However, the Korean government was very active in regulating the crypto market. In 2017, they banned ICOs in Korea as well as made it a requirement for all crypto accounts to be linked to real users. However, unlike in China, South Korea never fully banned cryptocurrencies. Since then South Korea has said many times they were working on regulations that will make cryptocurrency legal. This is what many crypto enthusiasts in Korea are waiting for. It is estimated that over 30% of full-time workers in Korea have held some form of cryptocurrency.

There is constant news regarding cryptocurrency and Blockchain in Korea. We at Seoulz are constantly updating on Blockchain in Korea so keep checking back for the latest updates. 

How did Koreans Make Money from the Kimchi Premium?

Kimchi Premium

This was very simple. You take a random Korean who wanted to take advantage of the Kimchi Premium which was at times 40% higher (All time high 48%) than outside of Korea. They would contact a friend or family member from the United States, China, or any other country where the price of the cryptocurrency was low and have them send the cryptocurrency to them in Korea. There they would be able to cash it out for a higher amount. The money will send be sent back to get more cryptocurrency and the process would repeat. As more and more Koreans learned about this strategy the 40% difference lowered, but very slowly. Shockingly this arbitrage lasted for over a month. During that window, there were many Koreans that made off with millions of dollars.

Many Koreans were even flying outside of Korea to buy cryptocurrency abroad then sell it on a Korean exchange for a higher price. However, having friends in those countries to buy the cryptocurrency for you was the preferred method. The issue for most Koreans was that they could only take about $50,000 dollars abroad.  If they exceeded this amount Customs will get alerted and you will have to explain in detail why you are sending the money abroad. In addition, the Korean government banned foreigners living in Korea to trade cryptocurrency on Korean crypto exchanges. This is why many Koreans secretly took large amounts of cash when traveling to these countries.  

Will the Kimchi Premium Happen Again?

This is very possible for the lone reason that still to this day no regulations on cryptocurrency trading have been made by the Korean government. There was a mini Kimchi Premium back in July of 2019 when Bitcoin was at $10,000 with a 10% difference between Korean and global exchanges. The younger generation in Korea is still looking for alternative investment options. They feel like they missed out and would be eager to jump back in once the situation arises. Therefore, it might take another Kimchi Premium to force the Korean government to take action and create regulations.