New South Korea Bitcoin Exchange Attracts Investors from Silicon Valley

Bitcoins, the digital currency that has captured the public’s attention, were selling for $959.98 on Jan.21 – based on information from the Mt. Gox Exchange. The high values – at least for now – show that some investors are eager to invest.

For instance, Korbit, a South Korean Bitcoin exchange, was able to raise $400,000 from investors. Angel investors include Tim Draper (who led the investment round), Naval Ravikant, AngelList co-founder, David Lee (News - Alert) of SV Angel, and Barry Silbert, who is the SecondMarket CEO and who started a Bitcoin Opportunity Fund. Also taking part were Pietro Dova of XG Ventures, Michael Yang, co-founder of mySimon, and Jay Eum, co-founder of Translink Capital. In addition, Korbit got seed funding from an organization called the Banks Foundation for Young Entrepreneurs, made up of South Korea’s banking alliance.

South Korea’s Ministry of Science ICT and Future Planning helped to arrange meetings between the startup – which is described as the largest Bitcoin exchange in South Korea — and the angel investors located in Silicon Valley.

TechCrunch reports that Korbit is “profitable” after about a half-year of operation, having started in July 2013. It reaches some $300,000 in trading volume a day, charging 0.6 percent on buys and sells, and there are some 20,000 registered users. At some point it will likely provide wallets.

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“Korbit has already reached profitability in less than a year of operations,” Tony Lyu, CEO of Korbit, was quoted by beSUCCESS. “In order to grow our lead and global competitiveness, however, we brought in strategic investors who can add critical value in addition to their investment dollars. We'll be leveraging their expertise in order to realize Bitcoin's full potential in the years ahead.”

The Bitcoin activity in South Korea shows, too, the potential for wealth creation. "Bitcoin's growth in Korea is remarkable for the sophistication of the public dialog around its potential for innovation and wealth creation," Draper was quoted as saying by The Verge. “Korbit is setting a great example for Bitcoin companies around the world by laying a healthy foundation for digital currencies in the Korean economy. Korea can play a leading role in the future of global finance by capitalizing on innovations like Bitcoin.”

In addition, Yang noted how South Korea “is looking for new growth engines in its push for a “creative economy,” and … Bitcoin is a great candidate to fulfill this vision. Companies such as Korbit, which combine technical expertise with customer loyalty, can grow to become global players.”

Other Bitcoin competitors were identified by Mashable as BitUP, ddengle, and Coinplug.

The interest among investors and number of subscribers also show how Bitcoins are “starting to gain serious traction in Korea, and the support of these global investors demonstrate that Korean companies could be at the heart of Bitcoin’s expansion globally,” BeTech reported.

Still, Robert J. Samuelson recently warned in a Washington Post article how Bitcoins are “mainly a financial gamble. They’re traded on electronic exchanges, where price swings have been mind-blowing... A business that accepts Bitcoins takes an immediate risk that the funds will lose 5 percent or 10 percent of their worth before they can be converted into traditional money (dollars, euros, yen).” Late last year, prices for Bitcoins were over $1,000. Yet, on April 16, 2013, prices were $68.36. Here are some examples where Bitcoins were used last year: European investors converted euros into Bitcoins after the Cyprus financial crisis; China’s Baidu announced it will sometimes take Bitcoins for payment; and Bitcoins were used by “Silk Road,” a Web site involved with alleged illegal drugs.

But Samuelson remains a self-confessed skeptic on Bitcoins. “Bitcoin seems a collapse waiting to happen,” Samuelson said. “There’s nothing behind it except clever programming.”