The blockchain industry in South Korea is reportedly facing a difficult period reports local media platform The Block Post. While the struggles of cryptocurrency exchanges in the country isn’t exactly news, it appears that other crypto-businesses are also experiencing similar problems sparking fears of a slowdown in South Korea’s digital economy advancement.
ICO Projects Going Downhill
According to The Block Post, South Korean blockchain projects are struggling underneath a litany of problems brought on lack of regulatory clarity and declining money supply.
Many projects that emerged during the 2017 initial coin offering (ICO) boom have seen their value dip by more than 90 percent. A lot of this decline began during the 2018 bear market and has carried on into 2019.
For example, Seoul-based Hycon which raised about $12.3 million in its September 2017 ICO has seen the price of its token slide from $0.083 to about $0.0058. This fall has led to the project’s token no longer appearing in the top-200 “coins” ranked by market capitalization.
Hycon is one of many South Korean blockchain-based projects in danger of disappearing post-ICO. Reports suggest that these projects have been bogged down by insignificant adoption and utilization.
There is reportedly a shortage of real utility for many of these blockchain projects. Consumers in South Korea still prefer to use the existing mainstream digital payment means rather than adopting blockchain-based payments.
In Danger of Losing Momentum
Another aspect of the problem is the tendency of South Korean blockchain projects to seek listings on overseas crypto exchanges. This trend has reportedly contributed greatly to dampening the local crypto economy.
Part of the reason for doing so stems from restrictive government policies. Crypto exchanges in South Korea have increasingly come under scrutiny from regulatory authorities.
As previously reported by BTCManager, commercial banks have even upscaled their anti-money laundering (AML) compliance procedures for local Bitcoin exchanges. Consequently, several platforms have been forced to shut down their businesses.
The country’s Financial Services Commission (FSC) also has plans to directly oversee the operations of these exchanges. This move could potentially increase the compliance burden for an already fragile crypto trading environment.
Busan once outed as being South Korea’s “blockchain hub” is experiencing the negative effects of the prevailing situation. Despite efforts to establish the city as a safe harbor for blockchain technology, the strict crypto policies in operation in the country is reportedly hampering the city’s digital economy.