South Korea has become a global technology hub in recent decades, spawning 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 post is part of CoinDesk's Metaverse Week.
The Korean government made headlines earlier this year when it announced it would inject 224 billion Korean won (nearly $200 million) into the domestic "Metaverse ecosystem." The money will be distributed in the form of grants to universities and private companies working on a variety of areas, including building Metaverse platforms, education, and developing 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, support more than 200 metaverse-related companies, and make the country the fifth largest metaverse market by number of users by 2026.
"It is important to create a world-class ecosystem for the augmented virtual world as a starting point for the intensive promotion of the augmented virtual world," the ministry's head, Park Yun-gyu, said 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 to boost the country's tech industry launched under previous President Moon Jae-In. By allocating $8.7 billion to a range of technology initiatives, from artificial intelligence to 6G to the Metaverse, the country hopes to create nearly 2 million new jobs.
The Korean government's commitment to the metaverse is somewhat unusual - although other governments, including China's, have already dipped a toe into the same virtual waters, South Korea is the only country that has jumped in headfirst.
"South Korea is the most aggressive and determined government in pushing metaverse development," says Nina Xiang, a tech journalist and author of "Parallel Metaverses.
"Other Asian countries do not have metaverse programs comparable in scale and scope to the South Korean government.
"Armed for success in the Metaverse?
For people who have witnessed Korea's rise from a developing country to an economic power within a generation, the early adoption of the Metaverse was not surprising, said Yat Siu, the Hong Kong-based chairman of Animoca Brands - the blockchain gaming powerhouse behind the Metaverse The Sandbox
.Siu points to the early adoption of broadband in Hong Kong in the 1990s. That investment spawned a vibrant Internet culture and a very 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 used to change in order to grow," said Dr. Sangkyun Kim, a professor at Kyung Hee University who has written several books on the Metaverse. "The Korean government and Metaverse companies agree that they should dominate the platform and content, not just the hardware industry."
The country's strong domestic hardware industry, dominated by Samsung and other semiconductor manufacturers, also makes South Korea's Metaverse dreams more realistic.
Manufacturing the devices needed to access Metaverse platforms, including cell phones, computers and XR (extended reality)/VR headsets, requires a strong base in these semiconductors, an industry in which South Korea has been very successful. Semiconductors accounted for nearly 17% of South Korean exports in 2020
.A complex political landscape
It also helps that the goal of building the Metaverse is a largely bipartisan issue in South Korea
."The Korean government's investment plan for the metaverse began under the previous president. The new president [Yoon Suk-Yeol] announced 110 'national tasks,' about 10 of which are related to the metaverse," Kim said.
"The metaverse is an issue that both the previous and current presidents consider important. The Yoon administration plans to revitalize the ecosystem by enacting laws on the metaverse and developing metaverse services to support economic activities," Kim added.
While the metaverse may not be divisive, the country's relationship with cryptocurrencies is more complicated.
Under the previous leadership of the Liberal Party, South Korean financial regulators cracked down on the crypto industry, issuing sweeping regulations that decimated the country's domestic exchanges. In 2021 alone, some 70 Korean exchanges were shut down, leaving only a handful.
Yoon, the current president, promised during the election campaign to deregulate the crypto industry - promises that will be much harder to keep after the collapse of Terra, which triggered a series of regulatory actions, lawsuits and investigations.
"Fair or not, Do Kwon has become an example," Siu said. "If you know the Korean judicial system, he will have a very hard time on a personal level."
Despite the public outrage over Terra, Siu told CoinDesk that he has not seen a domino effect in the broader crypto and metaverse industry in South Korea.
"People are stillpositive about the metaverse," Siu said
.A wide range of use cases for the metaverse
The broad list of potential use cases for metaverse technology outlined by the Ministry of Science and ICT ranges from everyday things (such as accessing city services in Seoul and attending language classes) to exciting things (such as virtual tourism and cultural events)
.The government's inconsistent approach to metaverse development mirrors the private sector's efforts.
Last year, SK Telecom - the telecommunications arm of SK Group, Korea's third-largest family-owned conglomerate - launched Ifland, a social metaverse platform.
In January, the famously tech-savvy chairman of retail conglomerate Lotte Group held a board meeting in the metaverse and pledged to transform the group into a metaverse-focused retail company. Lotte plans to launch a Metaverse shopping platform by the end of the summer, made possible by its acquisition of Caliverse, a homegrown Metaverse startup, last year.
Lotte Group's Metaverse ambitions are not limited to shopping: The group has also created a virtual replica of its popular theme park Lotte World in Zepeto, an internationally popular Metaverse platform developed by search engine giant Naver.
Klaytn, the blockchain arm of Korean messaging company Kakao, is also doubling down on its efforts to enter the Metaverse.
"Klaytn recognizes the potential of the metaverse to redefine society and is gearing its entire platform to support metaverse use cases," said Kimberly Kok, communications manager at Klaytn.
Kok said Klaytn is working to make it easier for game developers and Metaverse creators to build on its network - and has even launched a $500 million grant program to provide capital for Metaverse projects.
But it's not just chaebols and tech giants that are dabbling in the Metaverse - small startups across Korea are also experimenting with Metaverse technologies, from developing Metaverse co-working spaces to creating AI-powered Metaverse actors.
A bust in Busan
While government and industry alike seem excited about the Metaverse, enthusiasm doesn't always translate into success
.In 2019, the South Korean government declared Busan - a major port city in the south of the country - a "Blockchain City." By relaxing some strict crypto regulations and creating 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 so far have been underwhelming.
A 2020 report by the Busan Research Institute - a year after the project's launch - showed that the overwhelming majority of companies in Busan had no plans to integrate blockchain technology into their business - and 62% of those surveyed said they knew nothing about it.
According to Kim, there are two main reasons why the project has yet to take off.
"First, apart from Seoul and the metropolitan region, there are few places in Korea where high-tech industries are being developed. Metaverse and blockchain require a lot of IT personnel, and it is not easy to find these workers in local cities," Kim said.
"Second, the business models proposed by the companies that wanted to benefit from the initiative were not much different from the business models of existing blockchain companies," Kim added.
However, Kim also pointed out that the current leaders of the authorities in charge of the Busan "Blockchain City" initiative have been elected and will soon be replaced.
"Busan City has not given up on the matter, so I would like to wait for the results a little longer," Kim said.
Fran Velasquez contributed reporting.
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