South Korea has emerged as a global technology powerhouse in recent decades, giving rise to industry giants like Samsung, LG and Hyundai. If the country’s government gets its way, a metaverse company could be the next big thing to ride the Korean wave.
This piece is part of CoinDesk's Metaverse Week.
The Korean government made headlines earlier this year when it announced plans to pour 224 billion Korean won (nearly $200 million) into its domestic “metaverse ecosystem.” The money will be doled out in the form of grants to universities and private companies working on a variety of areas, including the construction of metaverse platforms, education and the development of virtual reality (VR)/augmented reality (AR) and hologram technologies.
The goal? According to the Ministry of Science and ICT, the funding will help educate and train 40,000 metaverse professionals in Korea, boost over 200 companies operating in the metaverse space, and, by 2026, turn the country into the fifth-largest metaverse market by number of users.
“It is important to create a world-class expanded virtual world ecosystem as a starting point for intensively fostering the expanded virtual world,” said the ministry’s head, Park Yun-gyu, in a translated statement included in the announcement.
The funding is a key part of an ambitious new plan called the “Digital New Deal” – a nationwide initiative aimed at helping the country’s tech industry expand – that started under Korea’s previous president, Moon Jae-In. By pouring $8.7 billion into a variety of tech initiatives, from artificial intelligence to 6G to the metaverse, the country hopes to create nearly 2 million new jobs.
The Korean government’s embrace of the metaverse is somewhat unusual – though other governments, including China’s, have dipped a toe into the same virtual waters, South Korea is the only country that has jumped in headfirst.
“South Korea stands as the most aggressive and determined government in pushing the development of the metaverse,” said Nina Xiang, tech journalist and author of “Parallel Metaverses.” “Other Asian countries don’t have similar types of metaverse programs in both scale and scope as that of the South Korean government.”
Poised for success in the metaverse?
To people who saw Korea’s ascent from developing economy to economic powerhouse in a generation, the early adoption of the metaverse hasn't been surprising, said Yat Siu, the Hong Kong-based chairman of Animoca Brands – the blockchain gaming powerhouse behind The Sandbox metaverse.
Siu pointed to the country’s early adoption of broadband in the 90s. That investment spawned a dynamic internet culture and a highly tech-savvy population accustomed to online gaming and virtual entertainment, including the increasingly virtual K-pop music industry.
“Korea developed its industry in a very short time after the Korean War. Koreans are accustomed to change for growth,” said Dr. Sangkyun Kim, a professor at Kyung Hee University who has written several books about the metaverse. “The Korean government and companies in the metaverse field share a consensus that they should dominate the platform and content, not just the hardware industry.”
The country’s strong domestic hardware industry – dominated by the presence of Samsung and other semiconductor manufacturers – also make South Korea’s metaverse dreams more realistic.
Manufacturing the equipment needed to access metaverse platforms, including mobile phones, computers and XR (extended reality)/VR headsets, will require a strong basis in those semiconductors, an industry South Korea thrives in. By far the country’s largest export, semiconductors accounted for nearly 17% of South Korea’s exports in 2020.
A complex political landscape
It also helps that the goal of building the metaverse has been a largely nonpartisan issue in South Korea.
“The Korean government’s investment plan for the metaverse began under the previous president. The newly inaugurated president [Yoon Suk-Yeol] announced 110 ‘national tasks,’ of which about 10 are related to the metaverse,” said Kim.
“The metaverse is a topic that both former and current presidents view as important. The Yoon government plans to revitalize the ecosystem by enacting metaverse-related laws and [developing] metaverse services that support economic activities,” Kim added.
While the metaverse may not be divisive, the country’s relationship with crypto is more complicated.
Under the former leadership of the Liberal party, South Korean financial regulators clamped down on the crypto industry, enacting sweeping regulations that decimated the country’s domestic exchanges. In 2021 alone, approximately 70 Korean exchanges were shuttered, leaving only a handful left standing.
“Fair or not, Do Kwon has become an example,” Siu said. “If you know anything about Korea’s judicial system … he’s going to struggle a lot on a personal level.”
Despite the public outrage directed at Terra, Siu told CoinDesk that he has not seen a knock-on effect across the wider crypto and metaverse industries in South Korea.
“People are still positively viewing the metaverse,” Siu said.
A variety of use cases for the metaverse
The government’s scattershot approach to metaverse development mirrors the efforts in private industry.
Read More: How to Invest in the Metaverse
In January, the famously tech-obsessed chairman of retail chaebol Lotte Group held a board meeting in the metaverse, and pledged to transform the group into a metaverse-focused retailer. Lotte plans to launch a metaverse shopping platform by the end of the summer, enabled by its earlier acquisition of Caliverse, a domestic metaverse startup, last year.
Lotte Group’s metaverse ambitions aren’t just limited to shopping: The conglomerate has also created a virtual replica of its popular Lotte World theme park in Zepeto, an internationally popular metaverse platform created by search engine giant Naver.
Klaytn, the blockchain arm of Korean messaging company Kakao, is also doubling down on its efforts to branch into the metaverse.
“Recognizing the potential of the metaverse to redefine society, Klaytn is turning its entire platform to support metaverse use cases,” said Kimberly Kok, a communications manager for Klaytn.
Kok said Klaytn is working to make it easier for game developers and metaverse builders to build on its network – and has even launched a $500 million grant program designed to provide capital to metaverse projects.
A bust in Busan
While government and industry alike seem enthusiastic about the metaverse, enthusiasm doesn’t always translate to success.
In 2019, the South Korean government declared Busan – a large port city in the south of the country – to be the “Blockchain City.” By relaxing some of the strict crypto regulations and setting up a sandbox for industry players to test new technologies, the government hoped to establish the country’s second-largest city as a hotbed for crypto innovation.
Despite South Korea’s efforts, however, the results have so far been underwhelming.
A report from the Busan Research Institute in 2020 – a year after the project was launched – indicated that the overwhelming majority of companies in Busan had no plans to integrate blockchain technology into their businesses – and 62% of surveyed companies said they knew nothing about it.
According to Kim, there are two main reasons that the project has yet to take off.
“First in Korea, except for Seoul and the metropolitan area, there are few places where high-tech industries are developed. Metaverse and blockchain require a lot of IT manpower, and it is not easy to supply such manpower in local cities,” Kim said.
“Second, the business models proposed by companies seeking to benefit from [the initiative] were not significantly different from the business models of existing blockchain companies,” Kim added.
However, Kim also pointed out that the current heads of the agencies in charge of the Busan “Blockchain City” initiative are elected and will soon be replaced.
“The city of Busan has not given up on this, so I’d like to see the results a little more,” Kim said.
Fran Velasquez contributed reporting.
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