A significant premium has developed in South Korea in the past few days, with bitcoin now nearly $1,000 more expensive than elsewhere.
One bitcoin is at about $11,600 – $11,700 on global exchanges at the time of writing. In South Korea, it’s at $12,500
South Korea’s crypto exchange Upbit is handling considerable volumes of half a billion during the past 24 hours.
That however is not making much difference to the premium with Bithumb too standing at just above $12,500.
Likewise there’s a circa 10% premium for ethereum, trading at about $325 in South Korea compared to $300 globally at the time of writing.
The reason for this premium is because you have to be South Korean to register in one of their local crypto exchanges.
Moreover, to open an account you need to go to a bank with requirements implemented last year for being physically present to access crypto exchange accounts.
Last month, an NH Bank staff member in South Korea complained of working too hard as new account openings were increasing considerably at Bithumb.
Despite such restriction, you’d think there would be some way of arbitraging this huge premium through perhaps local bitcoin.
You’d just need to convert South Korean money into dollars, buy with that bitcoin or eth on Coinbase or wherever and sell it on Bithumb or Upbit.
That this isn’t being done suggests some sort of extra restriction as demand is clearly increasing in South Korea, but that shouldn’t lead to a premium.
Considering that this is sort of free money at around $1,000 per bitcoin, supply should meet demand in South Korea as it has elsewhere.
It could be due to the fact fiat moves very slowly, arbitrage might too, but the significant restriction on access to their exchanges is probably the main explanation.
You can get around that by involving someone from South Korea in the arbitraging process, but that might be limiting just how much can be done and just how quickly.
This opportunity, in addition, competes with all the other arbitrage opportunities which can potentially be accessed more easily and more quickly, opportunities that have probably been rising now that volatility has returned.
So the solution to this premium is to relax restrictions on access to their crypto exchanges which go far beyond requirements for accounts with global exchanges.