South Korea’s crypto market is facing the contradiction of rising user participation and deposits, yet shrinking profitability. Fresh data from the country’s top financial regulator shows that billions are steadily leaving local platforms, raising questions about investor behaviour and market dynamics.
Capital flight signals arbitrage and offshore shift
According to a Wednesday report by the Financial Services Commission, cryptocurrency outflows from domestic exchanges surged to 90 trillion won (approximately $60 billion) in the second half of 2025. This marks a 14% increase from the 78.9 trillion won recorded in the first half of the year.
The regulator suggested that much of this capital movement is likely tied to arbitrage opportunities and similar strategies, where traders shift assets across borders to take advantage of price differences. Additionally, the growing preference for private wallets and offshore platforms hints at a gradual diversification away from local exchanges.
[Press Release] The KoFIU and the FSS conducted a survey on 27 registered virtual asset service providers to assess the current state of the domestic virtual asset market and keep relevant statistics up to date. https://t.co/Nc3zta32B8
— Financial Services Commission – FSC Korea (@FSC_Korea) March 25, 2026
Additionally, the Financial Supervisory Service is leveraging artificial intelligence to actively monitor crypto markets, enhancing the regulator’s ability to detect manipulation more swiftly and bolster investor protection.
Rising adoption fails to lift exchange profits
Despite the heavy outflows, user engagement within South Korea continues to climb. The number of crypto exchange accounts rose to 11.1 million by the end of 2025, reflecting a modest 3% increase from mid-year levels. Even more notable was the surge in deposits, which jumped 31% to 8.1 trillion won ($5.4 billion).
However, this growth did not translate into stronger financial performance for exchanges. The country’s 18 operating platforms reported a combined operating profit of 380.7 billion won ($253.4 million) in the second half, down sharply by 38% compared to the previous six months.
Market conditions appear to be a major factor. South Korea’s total crypto market capitalization fell 8% to 87.2 trillion won ($58 billion), while average daily trading volumes dropped 15% to 5.4 trillion won ($3.6 billion). A late-year dip in major cryptocurrency prices weighed heavily on activity and earnings.
In response, the government has begun reversing course. South Korea recently lifted its nine-year ban on corporate crypto investment, allowing public companies and professional investors to allocate up to 5% of equity capital into digital assets. Eligible investments will be restricted to the top 20 cryptocurrencies listed on the country’s five licensed exchanges, a move aimed at modernizing capital markets and retaining domestic liquidity.
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