Insolvency spikes for South Korean youth – Is a rise in crypto investment to blame?
Crypto investments are being blamed for a rise in the number of South Koreans aged 20-39 declaring insolvency.
Per Maeil Shinmun, the Seoul Rehabilitation Court said:
“The rise in [insolvency] appears to have been influenced by a growth in economic activities such as cryptocurrency and stock market investing among young people.”
The court noted that the problem was particularly pronounced among those “under 30”.
The 20-39 age demographic is often referred to as “2030” in South Korea.
Under South Korean law, individuals can apply to the judiciary for “personal rehabilitation” status.
This is a legal system that allows people who cannot repay their debts to enjoy a foreclosure before bankruptcy.
Pursuant to the Ministry’s Act, individuals may do so without “receiving any particular disadvantage under the law.”
Individuals must agree to a three-year court-approved repayment plan if accepted into the program.
Failure to comply with the plan will mean that bankruptcy proceedings can be initiated against the individual.
The outlet noted that last month saw the number of debtors applying for personal rehabilitation plans exceed 10,000 for the first time in history.
Citing a report by the Seoul Rehabilitation Court, the media outlet noted that “almost half of the debtors who applied for personal rehabilitation” last year were in the 2030 demographic.
In March last year, 7,455 people submitted applications for a personal rehabilitation plan.
Last month, this figure rose to 11,228 applications.
South Korean Crypto Investing: Is It To Blame For Youth Insolvency?
The court’s data showed that over 31% of applicants were in their 30s, with over 15% “under 29”.
Personal bankruptcy applications are also on the rise – with 3,875 applications in March 2023 compared to 3,584 in March last year.
But many young South Koreans feel that several factors are driving them to crypto.
These include a stagnant stock market, a youth unemployment rate of over 7%, and an increasingly unaffordable housing market.
Some argue that crypto investing is “no longer optional” for the 20-39 age group.
Even many conventional financial advisors have argued that buying crypto is “essential” rather than “optional” for the 2030 age group.
In 2021, an advisor told people in this age group that it would be advisable to “keep 5-10% of all their investment funds in crypto.”
