The Gen Z household debt to local banks has surged by 6x over the last year.
Regulators noted that millennials and Gen Z are attracted to altcoins on expectations of exponential returns.
On Thursday, July 8, a member of the South Korea national assembly raised an alarm on the growing debts among the younger generation, especially Gen Z, due to increased crypto trading activities. Rep. Kim Han-Jeong of the Democratic Party of Korea made the disclosure citing data from the Financial Supervisory Service.
The data shows three-year growing debt patterns among the younger generation. Back in 2019, GenZ accounted for 34 percent of South Korea’s household debt. The number has surged to 45.5 percent last year and more than 50 percent already in 2021, so far.
In absolute numbers, Gen Z’s household debt surged 6x in March 2021 was $22.6 billion (26 trillion won), up from $3.8 billion (4.4 trillion won) in march 2020. The South Korean lawmaker specifically noted that the massive debt incurred by millennials and Gen Z is due to active crypto trading. Quoting Han-Jeong, local news publication Korean Herald reports:
They have been lending excessively to buy real estate amid surging asset prices. The young generations have been burying themselves in stock investment and buying cryptocurrencies.
Asian economic giant South Korea has always been the epicentre of crypto trading activities in the region. The popular term “Kimchi premium” originates in South Korea itself. Meaning, cryptocurrencies trade at premium prices in South Korea in comparison to the global market.
As a result, South Korean regulators have initiated strong measures over the last year. Crypto exchange and local firms are thus feeling severe heat to continue with their operation in the country. Besides, the Korean regulators have asked exchanges to complete KYC due diligence by September 2021, or seize their business.
Gen Z Investors Swayed By Altcoins
The data from the Financial Supervisory Service shows that altcoins have created a major frenzy among young investors. These investors are swayed on the expectation of exponential returns through investing in small-cap coins.
The South Korean banking association has also expressed concern about this trading behaviour. Thus, it calls out its member association to conduct an audit on exchanges offering these coins. The recent crash in the altcoin space has spurred up regulatory attention further.
The regulators express worry that young investors might not be able to recover their losses amid the recent altcoin collapse. This will further hold true especially if exchanges start delisting the coins that appear to be pump and dump schemes.
Last month in June, South Korea’s most popular exchange Upbit itself delisted 24 altcoins. Similarly, another crypto exchange Coinbit has moved 36 coins in the watchlist with some of them ready for delisting.
The regulatory measures also make it mandatory for crypto exchanges to partner with local banks. This is in addition to registering with the Financial Intelligence Unit (FIU) and the Financial Services Commission (FSC).
By September 2021, exchanges will have to submit the records of transactions and report any suspicious ones to the FIU. Failure to do so can lead to a jail term for the exchanges.
Der Beitrag South Korean Government: Gen Z & Millennials are in massive debt because of crypto trading erschien zuerst auf Crypto News Flash.