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Stellar Co-Founder on Why South Korean Capital Flooding into Cryptocurrencies

Joyce Kim East Meets West

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Joyce Kim gave an insanely good talk at East Meets West in Honolulu on February 2, 2018. I can’t find her talk online and if I do I’ll embed it here. Her background gives her a unique perspective on all things cryptocurrency. She co-founded Stellar, co-founded a company bought by Ripple way back in 2013, and is currently co-founder and Managing Partner of Sparkchain Capital.

She shared a ton of insight but the one that really made me think a bit was her thoughts on why South Korean capital has been flowing into cryptocurrencies. The South Korean markets dominate cryptocurrencies. South Korea is the #3 market for Bitcoin, #1 for Ether (about 33% of the volume) and #1 for Ripple (about 50% of the volume). And that’s just for the top three cryptocurrencies. There are about one million registered daily traders in virtual currencies. That means just about one out of every 40 adults in South Korea are registered DAILY traders. Crazy!

The MIT Technology Review wrote an article about South Korea’s cryptocurrency boom. The article briefly covered individual and business demand in South Korea. But it didn’t cover a simple yet profound reason that Joyce shared. She noted that South Korea is expensive and that professionals can work a lifetime for large companies like Samsung or Hynduai and still not be able to afford a home in Seoul. Because of this, many folks are simply sticking a thousand bucks or so in crypto and hoping that in five years or so they may be able to buy a home. Joyce was clear that this is not a good investment strategy.

Dr. Julian Hosp, Co-founder & President at TenX, spoke after Joyce. He asked the group if anyone could explain what a blockchain was in 30 seconds using very simple language. Just a few hands shot up.  Julian then shared a story that on the plane ride to Hawaii, he sat next to a retired Hawaii resident. The gentleman told him, without any prompting, that he was heavily invested in Bitcoin. And so was nearly all of his family members. And then described his investment. He buys “blocks” of bitcoin and gets 1% interest each month and also a percentage of all of the funds from people under him. The gentleman invested his life savings and also loaded up two credit cards. Julian didn’t have the heart to tell him that without question he was in the middle of a Ponzi scheme. He did get his number and texted him later to get out of that investment asap.

We are at a point in crypto investing where the general public is well aware of the meteoric rise in values over a very short period of time for bitcoin, yet very few people really understand the intrinsic value specific cryptocurrencies carry. Without regulations to protect uninformed investors, we are seeing people make decisions at scale like what Joyce pointed out in South Korea.

My big take away from her talk is that this year we are likely to see unprecedented speed by our regulators to create infrastructure to protect average people from making unenlightened investment decisions. It’s needed.

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