Original title: South Korea's Crypto Market Research Report, Market Restart and Next Growth Cycle
Original author: JE labs
Original source: https://www.techflowpost.com/article/detail_29573.html
Reprinted: Daisy, Mars Finance
1. Introduction: The market paradigm is shifting
Key Signals
The South Korean digital asset market is undergoing one of the most significant structural resets in its history. Upbit's average daily trading volume fell from $9 billion in December 2024 to $1.78 billion in November 2025, a decline of about 80%. This occurred against the backdrop of a 141% year-on-year increase in the total number of new coins listed on South Korean exchanges in 2025. Meanwhile, retail funds are rapidly rotating into the soaring stock market. Led by the AI chip sector with Samsung Electronics and SK Hynix, the KOSPI index surged by about 70%.
The 'Kimchi Premium,' once regarded as a hallmark phenomenon of the Korean market, historically maintained around 10%, but has now compressed to approximately 1.75%. This is not a massive capital exodus, but a normalization process where speculative bubbles are being squeezed out.
The Kimchi Premium refers to the price differential of cryptocurrencies like Bitcoin on local exchanges in Korea (such as Upbit and Bithumb) compared to global exchanges (like Binance and Coinbase).
The core question is: Has the era of crypto in Korea ended, or is it undergoing a systematic reset before the next structural wave?
2. Behind the Freeze: Analyzing the Slowdown of the Korean Crypto Market
This is not a short-term correction, but a structural readjustment driven by regulation, capital controls, and investor fatigue.
2.1 Regulatory Delays and Uncertainties
As a core pillar for the future of digital assets in Korea, the stablecoin bill has been stalled for 7 months due to disputes over whether the issuing entity should be a bank or a non-bank institution. Currently, there are six different proposals under review, and the Financial Services Commission (FSC) plans to consolidate them into a unified bill by the end of 2025.
This regulatory vacuum has slowed institutional innovation and made Web2 companies exploring tokenization and settlement layer innovations more cautious, leading to a noticeably risk-averse overall environment.
2.2 Capital Outflows and Liquidity Traps
Korea's strict foreign exchange controls have blocked overseas market makers and institutions from injecting liquidity, leading to long-term one-way capital outflows.
(Foreign Exchange Transactions Act, FETA): Non-residents cannot freely hold or flexibly use KRW, and the vast majority of large foreign exchange and capital flows require mandatory reporting or prior approval, significantly limiting the ability of overseas institutions to operate smoothly in the Korean market.
Financial Supervisory Service (FSS) guidelines on foreign exchange transactions: Local banks face strict day position limits and are essentially prohibited from providing KRW liquidity to non-resident institutions, making it difficult for overseas market makers to establish KRW positions and provide true bilateral liquidity services.
While some predictions suggest that by 2030, Korea's digital asset market revenue will reach $635 million, the issue of liquidity tightening remains particularly prominent in the short term.
Interestingly, the Korean market heavily relies on leveraged trading. If a new catalyst emerges, such as clearer regulations or a significant global Bitcoin rally, the market could experience a rapid rebound.
2.3 Constructive Corrections, Not a Real Collapse
Rather than viewing the market cooling as a recession, it is better understood as a return to normalcy. Korea's cycle is aligning with global trends: shifting from speculative-driven coarse growth to a phase that focuses more on usability value. Market participants' focus is gradually shifting from short-term trading to infrastructure, custody, compliance, and real-world applications. Although this phase is painful, it is a necessary process to support sustainable expansion in the future.
3. The Crypto Giants Gather in Seoul
Even though local retail participation has noticeably decreased, global crypto giants are still actively increasing their stakes in the Korean market. This counter-cyclical expansion illustrates that external players remain highly optimistic about the technical literacy of the Korean population and the long-term potential of the institutional market.
3.1 Key Actions
In October 2025, Binance re-entered the Korean market by acquiring Gopax, ending a four-year absence. This was partly due to the easing of restrictions on foreign ownership in Korea, signaling that Korea is willing to further open up to global crypto companies.
This acquisition lays the foundation for more intense market competition, smoother liquidity channels, and more complex and mature product offerings, significantly upgrading the products and services available to local users.
Core Performance Indicator Matrix
Source: Surf AI, 2025
3.2 Why now?
This moment can be understood from three strategic factors:
High crypto literacy and extremely fast technology adoption speed
Korea remains one of the fastest markets globally for accepting and implementing emerging technologies (including AI and digital assets).
Prospects for Stablecoin Integration
Local banks, fintech companies, and internet giants like Kakao and Naver are exploring stablecoin pilots, aiming to bridge the local financial system with the on-chain world.
Institutional demand continues to heat up
Korean institutional investors are increasingly interested in custody, asset tokenization, and legally compliant digital asset allocations, laying the groundwork for sustained long-term capital inflows.
4. Outlook
The current slump is not an end but a structural reset that pushes the Korean market from pure speculation towards a value-driven approach that aligns more with institutional demand. Legislation on stablecoins, institutional custody infrastructure, and the potential Bitcoin ETF are likely to become key pillars of growth in the next phase. Korea is entering a new stage driven by real product value, user education, and compliance innovation.
4.1 Market Predictions
The Korean crypto market is expected to grow slowly at a compound annual growth rate of 2.94%, but the real turning point may come from the anticipated approval of a Bitcoin ETF in 2026. This topic has been frequently discussed and circulated among Korean policymakers.
Once approved, potential changes may include:
Korean pension funds and asset management institutions formally participate
Massive entry of overseas market makers
Higher quality price discovery and tighter bid-ask spreads
This is also expected to re-establish Korea's position as a regional capital 'net inflow hub.'
4.2 The Integration of Korea's Web2 and Web3
Korean large enterprises are further delving into the practical application layer of blockchain:
Banks, fintech companies, and large tech firms are testing stablecoin pilots and exploring payment and settlement tracks related to the digital won.
Upbit and Bithumb have already launched or expanded institutional custody services, allowing local institutions and overseas capital to re-enter the market in a compliant manner.
This marks a shift in the market from a speculative use case to an application model centered on infrastructure and actual usage.
4.3 Global Benchmarking
Korea's regulatory direction is increasingly close to Japan: strict but relatively predictable. If Korea can achieve similar regulatory clarity on key issues such as stablecoins, asset tokenization, and digital asset ETFs, it has a real opportunity to become one of Asia's most balanced crypto centers, attracting institutional builders and global liquidity.
4.4 From a Web3 marketing perspective: Why Korea places special emphasis on the real usability of products
In Korea's next cycle, an important but often underestimated structural driving force is the increasing demand for real product usability.
Korea is one of the few markets where exchanges and users actively test, verify, and deeply understand a project before truly accepting it. This trend is becoming increasingly evident as the market transitions to a value-driven phase.
For example:
Upbit's quiz activity: Treating education as market infrastructure
Upbit often conducts quiz-based educational activities when listing new coins, requiring users to answer questions about:
The project's technical architecture
Token economic model
Use cases and real functions
Roadmap and risk profile
This is fundamentally different from the common airdrop and 'sheep shearing' models found in other regions. It conveys the message that Korean exchanges place greater emphasis on verification, understanding, and user education, and require project parties to clearly and thoroughly explain their value.
Upbit X Surf's actual product usage activities
In 2025, Upbit and Surf held a practical product-themed event encouraging users to directly use project products, experience their functions, and produce meaningful usage results.
This clearly reflects a shift:
Korean exchanges are increasingly valuing verification based on actual usage experience, rather than superficial exposure marketing.
In Korea, a product that is usable and user-friendly is itself the strongest marketing.
Without execution to back up the narrative, it is impossible to survive long-term here.
4.5 Investor's Manual
To effectively position during this reset phase, investors need to:
Continue to monitor key catalytic events, such as: progress on the FSC bill consolidation, discussions related to Bitcoin ETFs, and the impending enactment of stablecoin legislation.
Prioritize projects with long-term usability rather than purely relying on sentiment and speculative tokens.
Pay close attention to macro indicators in the fourth quarter, as historically, Korean retail investors often re-enter the market in large numbers during risk appetite recovery cycles.
By diversifying allocations, reduce reliance on thematic narratives that depend entirely on political and regulatory timing.
Additionally, investors should focus on those international ecosystems that are establishing local landing capabilities in Korea in advance. A key trend shaping Korea's next cycle is that global public chain ecosystems are rapidly establishing partnerships with large Korean enterprises. This indicates that Korea is transitioning from a market primarily focused on trading consumption to a hub role of 'co-development and deep integration of infrastructure.'
Case 1: Sui x t’order
Local partner: t’order (dominant table-ordering and POS network in Korea)
Integration method: Supports stablecoin payments pegged to the KRW, combined with QR codes and facial payments, zero fees for merchants, real-time settlement
Case 2: Solana x Shinhan Securities
Local partner: Shinhan Securities (one of Korea's top brokerages)
Collaboration method: Signing a strategic memorandum of understanding (MOU) to jointly support the development of Web3 entrepreneurs, developers, and the Solana ecosystem in Korea, led by Superteam Korea.
Case 3: Arbitrum x Lotte Group
Local partner: Lotte Group (one of Korea's largest corporate groups)
Integration method: Arbitrum provides significant developer funding to Caliverse (Lotte's metaverse platform) for integrating the Arbitrum blockchain
5. Korea's crypto winter is a reset, not a retreat—it's also a strategic entry window for builders
Despite the current market contraction, Korea remains one of the most vibrant crypto markets in the world. Stablecoins are helping large Web2 companies explore on-chain settlement and infrastructure tokenization; top exchanges are continually expanding custody and institutional services; and the likelihood of Bitcoin ETF approvals has significantly increased the probability of foreign liquidity flowing back into Korea.
The crypto ecosystem in Korea is not coming to an end, but is maturing rapidly.
This reset means that Korea is transitioning from a retail paradise driven by speculation to a digital asset economy system supported by structured design and institutional participation.
