Author: Zen, PANews
South Korea has long been one of the most distinctive countries in the global cryptocurrency market.
It has a massive retail investor base, Upbit and Bithumb have long ranked among the top exchanges globally by trading volume, and the activity level of Korean won trading pairs is enough to influence the global market performance of some crypto assets. However, in terms of the operating environment for crypto businesses, regulatory access, and cross-border business conditions, South Korea's performance shows a clear gap compared with its massive trading market.
On October 8, a report released by The Block Research revealed this contrast: among 15 evaluated jurisdictions, South Korea ranked only 12th overall. It ranked 6th in market environment, but 13th in domestic regulation and market access, and came in last in cross-border openness. Meanwhile, Chainalysis's 2026 Global Crypto Adoption Index, released on September 23, ranked South Korea 5th globally.
The two reports use different evaluation systems. The former measures a country's overall ability to attract businesses, developers, and capital, while the latter focuses on the actual use of and participation in crypto assets. But together they reveal a unique feature of the South Korean market: trading demand is strong, while the institutions and infrastructure supporting industry development are relatively lagging.
How active is retail trading in South Korea?
How large is South Korea's cryptocurrency market?
Chainalysis's "2026 East Asia Crypto Adoption Report," released on October 5, shows that between July 2025 and June 2026, South Korea's crypto economic activity reached $449.1 billion, up 12.3% year over year, ranking first in East Asia. During the same period, Japan was about $228.3 billion, Hong Kong was $192.2 billion, and mainland China was $176.3 billion. Under this statistical scope, South Korea's scale is close to twice that of Japan.
In addition, according to the survey of virtual asset service providers for the first half of 2026 released on October 1 by the Korea Financial Intelligence Unit (KoFIU) and the Financial Supervisory Service, as of the first half of this year, South Korean exchanges had a total of 11.175 million tradable user accounts. More noteworthy is the asset distribution of these accounts: about 8.63 million accounts held crypto assets worth less than 1 million Korean won, accounting for about 77% of all tradable accounts.
At the same time, the monthly trading turnover rate of the Korean won trading market reached 100% to 201%, while the corresponding indicators for South Korea's KOSPI and KOSDAQ markets during the same period were 25% and 43%, respectively. Although turnover statistics for crypto and stock markets cannot be directly and simply compared, they are enough to show the high-frequency circulation characteristics of South Korean crypto assets.
In terms of asset selection, South Korean investors also show a clear trading preference. Chainalysis found that in the first half of 2026, AI-related crypto assets gradually became the most active thematic investment category in South Korea's Korean won market. From July 2025 to June 2026, Worldcoin (WLD) recorded a cumulative trading volume of about $7.41 billion, while SAHARA and VIRTUAL reached about $3.2 billion and $2.7 billion, respectively.
South Korean investors' interest in AI tokens echoes the investment boom in its stock market chasing the AI industry chain. Chainalysis statistics show that as of June 2026, the share of AI-related tokens in Korean won trading volume reached 19.5 times the corresponding proportion in the Japanese yen market during the same period.
Vertically, South Korea's crypto market has undergone a sharp contraction over the past year. In the first half of 2026, the average daily trading volume of South Korean exchanges was 3.1 trillion Korean won, down 44% from 5.4 trillion Korean won in the second half of 2025; exchange operating profit fell from 374.8 billion Korean won to 81.6 billion Korean won, a decline of 78%.
During the same period, the number of user accounts still grew slightly by 0.4%, but the balance of Korean won customer deposits held by exchanges fell from 8.1 trillion Korean won to 5.2 trillion Korean won, a decrease of 35%.
Massive retail trading demand is mainly absorbed by a few leading platforms, but whether this market advantage can be further transformed into growth in institutional custody, payment settlement, and on-chain financial services remains to be seen.
Banks control the market entrance
A key difference between South Korea's crypto market and other major countries is that commercial banks play an especially important role.
To operate a Korean won crypto trading business in South Korea, an exchange must establish a partnership with a bank to provide users with real-name verified deposit and withdrawal accounts. This arrangement allows banks to participate in customer identity verification, monitoring of fund flows, and anti-money laundering management, but it also means that bank partnership eligibility has in effect become an important threshold for exchanges to enter the Korean won market.
This system has directly affected the competitive landscape of South Korean exchanges over the past few years. The most typical case is the partnership between Upbit and the internet bank K Bank. After the two established a partnership in 2020, Upbit gained more convenient online account opening and Korean won deposit and withdrawal channels. With the arrival of the 2021 crypto bull market, Upbit rapidly expanded its user base and established its advantage in the South Korean market.
Bank accounts were originally just trading infrastructure, but they gradually became a core competitive resource for exchanges fighting for market share. As of the end of June 2026, South Korea had a total of 28 declared virtual asset service providers. Among them, only five exchanges could still provide Korean won trading services: Upbit, Bithumb, Coinone, Digital X (formerly Korbit), and Gopax.
In South Korea, market share in the crypto industry is highly concentrated. Upbit and Bithumb have long firmly occupied about 60% and 30% of the market, respectively, with the two together exceeding 90%. Since 2026, in order to compete for gradually shrinking trading funds, platforms have continued to attract users by lowering fees and adding new token trading pairs. At the end of August, Digital X announced that it would waive all token trading fees for one year, and Coinone subsequently launched a zero-fee policy. Entering September, Coinone's market share rose from an average of about 2.72% in August to 5.9%, while Digital X rose from 0.55% to 1.06%.
However, price competition can attract users, but it is difficult to change the competitive barriers formed by bank account access, liquidity depth, and brand trust. When market liquidity declines, investors tend to choose large platforms with better order book depth, further strengthening the advantage of leading exchanges.
This institutional arrangement in South Korea is not without rationality. The real-name account system reduces the convenience of anonymous funds entering and leaving exchanges and also helps with anti-money laundering and investor protection. On September 23 of this year, South Korea's Financial Services Commission also referred four cases suspected of unfair crypto asset trading for investigation, including the use of API automated trading programs to carry out ultra-short-term price manipulation.
However, the flip side of a regulatory system built mainly to control trading risk is that it cannot simultaneously meet the needs of crypto industry innovation and cross-border development.
Trading stays in South Korea, while token issuance and industry activity flow overseas
Another long-standing problem in South Korea's crypto industry is the mismatch between massive domestic trading demand and the local token issuance environment.
This situation can be traced back to 2017. In September of that year, South Korean financial regulators announced a ban on domestic ICOs. Facing regulatory restrictions, some South Korean blockchain projects began issuing tokens through foundations or other legal entities in overseas jurisdictions such as Singapore and Switzerland.
Terra, already regarded as a negative example in the industry, is a representative case under this policy. Its core founding team had close ties to South Korea, but the token issuance and related business entities were set up overseas. The collapse of Terra-Luna in 2022 further strengthened the South Korean government's attention to investor protection and token issuance risks.
This model of establishing legal entities overseas has continued in South Korea's crypto industry to this day. Kaia established a foundation in the Abu Dhabi Global Market in 2024, and Nexpace, the operating company of South Korean gaming giant Nexon's blockchain business MapleStory Universe, is also located in Abu Dhabi.
South Korea does not lack crypto projects capable of going global, but its massive domestic market and mature technology industry have not been transformed into an equivalent advantage in attracting these projects to issue, operate, and expand international business domestically. This may be the deepest contradiction in South Korea's crypto industry: it has world-leading trading demand, but finds it difficult to transform that into a complete local industry ecosystem.
To some extent, for a crypto startup, if its core business requires issuing tokens, attracting global liquidity, or conducting cross-border payments, then whether there is a clear local legal identity, financing channels, and international business licenses is often more important than how many domestic trading users there are.The Global Crypto Competitiveness Index just released by The Block highlights precisely this point. Its evaluation system covers not only trading volume and crypto asset holding rates, but also developer density, venture capital, industry infrastructure, regulatory access, and the degree of cross-border business openness. South Korea ranks 6th in market environment, yet ranks last in cross-border openness, reflecting a clear gap between retail trading demand and the internationalized operating environment.
South Korea does not actually lack the technological and commercial foundation to develop these businesses. It has mature internet companies, a semiconductor industry, a gaming industry, and a fintech market, and a number of local blockchain projects have long had international operating experience.
What truly deserves attention now is whether South Korea can enable more companies to complete the entire process locally—from financing, issuance, and operations to international business expansion—rather than merely allowing globally issued crypto assets to enter South Korean exchanges for trading.
Traditional financial giants enter, and the industry is redistributing opportunities
Since 2025, the most obvious change in South Korea's crypto policy has been that the government began shifting from restricting retail speculation to discussing institutional participation and industrial competitiveness. This shift has also attracted banks, securities firms, and internet giants into the market.
Among them, the most closely watched is undoubtedly the capital integration between South Korean internet giant Naver Financial and Dunamu, the operator of the largest cryptocurrency exchange Upbit. According to the latest arrangement disclosed on October 7, the two sides postponed the full share swap date from December 31, 2026 to March 31, 2027, and the shareholders' meeting was also postponed to February next year. In addition, the related transaction still needs to complete antitrust review and financial regulatory approval.
By contrast, Mirae Asset Group's move into the crypto trading industry has already made concrete progress. In July this year, Mirae Asset Consulting, under Mirae Asset Group, completed the acquisition of South Korean crypto exchange Korbit, and its shareholding was subsequently further increased to 97.15%. Korbit was renamed Digital X, becoming an important platform for Mirae Asset Group to expand digital asset-related businesses.
Bank capital is also accelerating its layout. In June this year, Hana Bank completed the acquisition of approximately 6.55% equity in Upbit operator Dunamu, with a transaction amount of about 1 trillion won, becoming an important case of a South Korean commercial bank directly investing in a crypto exchange.
In addition, Hana Financial Group and SK Telecom are also strategic shareholders of BitGo Korea. On August 18, BitGo Korea received confirmation from the Korea Financial Intelligence Unit accepting its registration as a virtual asset service provider, and was approved to provide digital asset custody and transfer services to institutional and corporate clients.
This means that new participants are emerging in South Korea's digital asset market. It is no longer only retail exchanges, but has begun to extend into areas such as institutional custody, fintech, and connections with traditional capital markets.
However, there is still considerable uncertainty in the pace of South Korea's institutional opening. South Korea's Financial Services Commission proposed as early as February 2025 a phased opening for corporate participation in the crypto market, planning to allow about 3,500 listed companies and professional investment institutions to conduct pilot investment trading, originally scheduled to start in the second half of that year. But as of now, this stage has still not been formally implemented due to regulatory details and related legislative coordination.
The debate over won-backed stablecoins is likewise not over. South Korea's central bank and the banking sector tend to emphasize banks' dominant role among issuers, including proposing a plan requiring banks to hold at least 51%; however, the extent to which tech companies and crypto-native companies are allowed to participate in issuance remains an important disagreement in policy discussions.
On October 8, Lee Eok-won, chairman of South Korea's Financial Services Commission, said at a National Assembly hearing that institutional consultations on the Digital Asset Basic Act have entered the final stage and that legislation will be pushed forward as soon as possible. However, he did not announce a final decision on the types of won-backed stablecoins or the licensing arrangements for virtual asset service providers.
Another institutional reform with relatively clear progress is securities tokenization.
On October 1, South Korea's Financial Services Commission announced the launch of a public consultation on supporting rules related to the issuance and circulation of tokenized securities, with the consultation period from October 2 to November 11. The relevant legal amendments are planned to take effect on February 4, 2027, initially providing an institutional foundation for the tokenization of stocks, bonds, funds, and some non-traditional securities.
This reform is different from the still-discussed general crypto token issuance system, but it means that South Korea is trying to provide a clear legal path for blockchain technology to enter traditional capital markets.
Over the past decade, the South Korean market has proven that it can generate world-leading demand for crypto asset trading; the next challenge is how to further transform this demand into local companies, financial services, and international industrial competitiveness.
What determines the development of the crypto industry is not only how much trading volume exchanges can complete each day, but also how many companies are willing to stay in South Korea and build crypto businesses truly oriented toward the global market.