Interest in the crypto market in South Korea has noticeably declined. Over the past year, the volume of digital assets held by local investors fell from about $83 billion to $41 billion. At the same time, trading volumes on the country’s largest exchanges dropped sharply.
The market is changing under several factors at once. Investors are moving into stocks, regulators are preparing to tighten control, and the tax burden is gradually becoming a reality.
Capital Leaves Crypto Exchanges
According to the Bank of Korea, the value of crypto assets on the five largest exchanges in the country dropped to 60.6 trillion won by the end of February 2026. A year earlier, the figure exceeded 121 trillion won.
Trading activity fell even more. The average daily volume of transactions dropped to about $3 billion compared to $11.6 billion at the end of 2024.
This is one of the sharpest pullbacks in recent years. For a long time, South Korea was considered one of the largest retail cryptocurrency markets.
Investors Shift to the Stock Market
The main reason for the decline is cited as capital redistribution. Against the backdrop of a growing stock market, some investors began withdrawing funds from digital assets.
An additional indicator was the reduction of deposits in Korean won on crypto exchanges. The volume of users’ available funds fell from about 10.7 trillion to 7.8 trillion won.
This shows a change in sentiment. The market has become more cautious after a period of high volatility and cryptocurrency corrections.
Stablecoins Appear More Resilient Than the Rest of the Market
Against the general backdrop, the stablecoin segment stands out. Their volumes continued to grow even as overall activity declined.
Since July 2024, the volume of stablecoins increased from about $60 million to a peak of $597 million by the end of 2025. Later, the figure dropped to $415 million, but the decline was much less than in the rest of the market.
This reflects a change in usage models. Stablecoins are increasingly used as a tool for storing liquidity and transfers, not just for trading.
South Korea Prepares Strict AML Rules
The situation is exacerbated by regulatory pressure. In August, authorities plan to launch new anti-money laundering rules. According to the draft, transactions over 10 million won with foreign exchanges or private wallets will be automatically flagged as suspicious.
For the industry, this is a serious blow. Exchanges fear increased bureaucratic burden and a sharp rise in the number of inspections.
Crypto Industry Warns of User Outflow Risk
The Korean DAXA Association has already spoken out against the new requirements. According to the organization, the number of suspicious transactions could increase by about 85 times.
If the largest exchanges currently process about 63,000 such cases per year, after the reform the figure could exceed 5.4 million.
The industry fears that users will start moving to foreign platforms. This primarily refers to Binance and other global exchanges.
Crypto Tax Returns to the Agenda
Additional tension is created by tax reform. The Ministry of Finance of South Korea confirmed that the tax on cryptocurrency profits will take effect on January 1, 2027.
The rate will be 22%. The market has been discussing this measure for several years, but now the authorities have set a firm launch date for the first time. For investors, this is another pressure factor, especially amid declining trading activity and worsening market sentiment.
At the Same Time, the Country Is Not Abandoning Blockchain
Despite the cooling interest in cryptocurrencies, South Korea continues to develop digital asset infrastructure.
Recently, Samsung SDS received a contract to create a blockchain platform for the Korea Securities Depository. The project is related to the development of the tokenized asset market and is expected to be completed by 2027.
This shows a split in approaches. Authorities are tightening control over the speculative segment but at the same time supporting infrastructural blockchain solutions.
The Market Becomes More Institutional
The Korean crypto market has long been focused on retail traders. Now the model is gradually changing. Regulators are trying to integrate digital assets into a more formal financial system. This means more control, reporting, and taxes.
For some market participants, such a transformation seems negative. However, authorities consider it necessary for the sector’s long-term stability.
What This Means for the Market
South Korea remains one of the most important centers of the crypto industry, so the decline in activity here is closely watched by the global market.
The drop in volumes shows how sensitive the retail segment remains to regulation and market conditions.
At the same time, the growth of stablecoins and the development of infrastructure projects indicate that interest in digital assets has not completely disappeared. It is gradually changing form.
What’s Next?
The key period will be the second half of 2026. The market will assess the impact of the new AML rules and investors’ reaction to the upcoming tax.
If regulatory pressure increases, some activity may indeed move to foreign platforms. However, the development of tokenized assets and blockchain infrastructure shows that South Korea does not intend to abandon the digital economy.
The country is trying to move from a speculative crypto market to a more controlled model. The only question is how painless this transition will be.
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