The virtual asset market in Korea faces limitations due to regulatory constraints. Domestic exchanges are restricted to Korean nationals, and trading volume is driven primarily by local participants. Institutional investments and initial coin offerings are also banned.

Despite these restrictions, the market continues to attract global attention.

From Sept. 3 to 4, a total of 17,000 participants gathered for Korea Blockchain Week (KBW) 2024, the largest Web 3.0 event co-hosted by Factblock and Hashed. Thirty-five percent of the participants were foreign nationals, with over 300 speakers from around the world taking part.

During the event, various global crypto projects announced their intentions to expand their presence in Korea. “We are doubling down on this region and will continue to do so,” Ripple CEO Brad Garlinghouse said on Sept. 3 during his speech at KBW 2024.

“The scale of side events hosted by various projects expanded, reflecting the increasing demand from industry professionals visiting Korea during the KBW,” said Lee Seung-hwa, DeSpread’s head of research.

The global enthusiasm is somewhat unprecedented, except for sectors related to entertainment.

“Korea has really never seen this level of interest from global markets in a specific industry vertical. I think Korea definitely is among the top three countries in the world where investors, enterprises and developers are all coming together,” said Daniel Kim, CEO and founder of Tiger Research.

But what factors have enabled Korea to gain so much ground in this global market?

The country’s ultimate strength lies in its strong retail enthusiasm, driven by widespread internet use access and a tech-savvy population. Many crypto projects refer to Korea as the “El Dorado of liquidity.”

According to the Financial Services Commission, the number of virtual asset traders in Korea reached 6.45 million as of 2023, accounting for 12.5 percent of the total population.

“Even today, Upbit consistently ranks among the top five exchanges by average trading volume and is often second only to Binance. This is particularly surprising considering that Korean exchanges are restricted to Korean residents, unlike broader-audience exchanges such as Binance, Coinbase and HTX,” Min Jung, an analyst at Presto Labs, said in a report published in July.

In November 2023, the Korean won even surpassed the U.S. dollar as the most-traded currency in Bitcoin transactions, suggesting that cryptocurrencies have become deeply integrated into the country’s financial landscape.

Another factor is the country’s abundance of builders — not only startups but also traditional enterprises.

Big conglomerates like Samsung, LG and Hyundai are all investing in blockchain through various approaches. Each company has also appointed a Web 3.0 team or manager within their R&D divisions.

For instance, Samsung invests in blockchain through Samsung Next, a venture capital firm based in North America. Its website currently lists 30 blockchain companies it has invested in.

At the forefront of the transitions are domestic gaming companies, according to Kim.

In 2022, Netmarble established a subsidiary called MARBLEX to bring its flagship games onto the blockchain. Nexon also created a project called MapleStory Universe to transition its over-20-year-old intellectual property (IP), MapleStory, onto the blockchain.

“Areas like gaming and entertainment represent foundational IPs that excite people from abroad about Korea,” Kim said.

There are also skilled developers focused on the technical aspects of blockchain, such as Sooho.io, which specializes in blockchain development, as well as Haechi Labs and D’CENT, which develop wallets. The presence of these companies is due largely to the availability of smart contract developers in the blockchain space.

However, negative public perceptions towards cryptocurrencies and regulatory uncertainties pose barriers.

“The erratic market behaviors such as listing/de-listing pumps (e.g., price surges around coin delisting announcements), have reinforced this perception, and, as a result, the market’s focus remains on short-term speculation rather than long-term investment based on Web 3.0 fundamentals,” Jung said.

This led government officials to work actively on regulatory frameworks, with their primarily focus on protecting investors. Jung noted that little attention is given to supporting innovation and nurturing the industry.

Market insiders admit that voluntary efforts are essential to clean up the market. Yet, they also call for incentives to support the industry, such as backing innovative programs within a regulatory sandbox.

“The prevailing sentiment in the domestic industry is, ‘We cannot raise the anchor despite the tailwind.’ Companies are busy hiding their involvement in crypto while secretly pursuing various activities,” Kim said. “Korea has such strong fundamentals. K-Web 3 can be the next K-drama or next K-movie.”