The value of digital assets held at South Korea’s five major cryptocurrency exchanges fell to 60.6 trillion won ($41.4 billion) at the end of February, down from 121.8 trillion won in January 2025, Bank of Korea data showed Sunday. The 50.2 percent drop reflects a sharp flight of capital into the booming local stock market and falling crypto prices, NH Investment & Securities analyst Hong Sung-wook said.
Average daily trading volume has cratered alongside the holdings. After peaking at 17.1 trillion won in December 2025, volume plunged to roughly 4.5 trillion won by the end of February 2026, according to the central bank data submitted to Rep. Cha Gyu-geun of the Rebuilding Korea Party.
The numbers tell a brutal story. A market that once hummed with speculative energy has gone quiet. “The sharp drop in domestic cryptocurrency holdings appears to have been driven by both capital flowing into the strong local stock market and declines in crypto prices,” Hong told the Korea Times. Behind the numbers lies a regulatory squeeze that industry players say could make things worse.
In August, revised rules under the Act on Reporting and Use of Specified Financial Transaction Information take effect, strengthening anti-money laundering oversight. Financial institutions and virtual asset service providers will face tougher customer identity verification and suspicious transaction reporting requirements. One proposed rule is drawing particular fire.
It would automatically classify any cryptocurrency transaction exceeding 10 million won involving overseas exchanges or private wallets as suspicious and report it to the Financial Intelligence Unit. The Digital Asset eXchange Alliance, which represents major domestic exchanges, argues the blanket threshold ignores how digital assets actually work. “Applying a blanket suspicious transaction reporting requirement to all crypto transfers above 10 million won fails to reflect the unique nature of digital assets,” DAXA said in its report. It pointed to the United States, where transactions involving overseas exchanges or private wallets are not automatically flagged.
There, reporting obligations kick in only when transactions above $2,000 show clear signs of suspicious activity. DAXA has submitted a comment letter to the Ministry of Government Legislation, urging authorities to reconsider. The alliance warns the rules could pile excessive compliance burdens on exchanges and further weaken market activity.
What this actually means for your family. If you hold crypto on a Korean exchange and want to move it to a private wallet or an overseas platform like Binance, a 10 million won transfer could trigger a suspicious activity report. That is roughly $6,800 — a sum not unusual for serious retail investors.
The policy says one thing. The reality says another. While regulators talk about fighting money laundering, ordinary investors face new friction just as the market is already bleeding.
A separate fight is brewing over taxes. The government plans to introduce cryptocurrency taxation next year, imposing a 22 percent levy on gains. That comes after the financial investment income tax was repealed in late 2024, removing tax obligations for general equity investors.
Park Soo-young of the main opposition People Power Party noted that authorities can currently track transactions only at the country’s five won-based exchanges. “The policy could accelerate capital outflows to overseas trading platforms such as Binance,” he said. Oh Moon-sung, an adjunct professor at Kyung Hee University’s Graduate School of Business, argued the tax plan violates constitutional principles. “Applying taxes exclusively to cryptocurrency investments while excluding stock investments conflicts with the constitutional principle of equal taxation,” he said. He added that many reasons cited for abolishing the financial investment income tax — weakening market activity, insufficient tax infrastructure — apply equally to digital assets.
Both sides claim victory. Here are the numbers. Stock investors got a tax cut.
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Crypto investors are about to get a tax hike. The asymmetry is fueling a fairness debate that could shape the 2027 presidential election. Oh urged postponing crypto taxation until clear guidelines exist for emerging digital asset transactions and an integrated reporting system connects domestic exchanges with the National Tax Service.
The market contraction mirrors a global cooling. Bitcoin, which surged past $100,000 in early 2025, has struggled to hold gains as central banks kept rates higher for longer. South Korea’s retail-driven crypto culture, once the envy of exchanges worldwide, is now a cautionary tale.
Upbit, Bithumb, Korbit, Coinone, and Gopax — the five exchanges tracked by the Bank of Korea — have all felt the chill. Upbit remains the dominant player, but even its volumes have thinned. The regulatory push is not happening in a vacuum.
The Financial Services Commission has been tightening oversight since the Terra-Luna collapse in 2022 wiped out billions in Korean household wealth. That trauma still haunts policymakers. Why It Matters: South Korea is one of the world’s most active crypto markets.
A sustained downturn there can depress global altcoin prices, given the country’s outsized role in speculative trading. The regulatory and tax decisions made in Seoul over the next six months will test whether governments can tame crypto without killing it — a question every major economy is now asking. Key takeaways: - Crypto holdings at South Korea’s five major exchanges fell 50.2% to 60.6 trillion won over 13 months, Bank of Korea data shows. - Daily trading volume plunged from 17.1 trillion won in December 2025 to 4.5 trillion won in February 2026. - A proposed rule would auto-report all crypto transfers over 10 million won to overseas exchanges or private wallets as suspicious.
The next flashpoint comes in August, when the revised anti-money laundering rules take effect. DAXA’s comment letter could still sway the Ministry of Government Legislation, but time is short. If the 10 million won threshold sticks, expect an exodus of capital to unregulated overseas platforms.
Then comes the tax fight. The National Assembly must approve the 2027 tax plan. Opposition lawmakers are already mobilizing.
Park Soo-young’s warning about Binance is a preview of the arguments to come. For Korean crypto investors, the message is clear: the easy days are over. Regulation is tightening.
Taxes are coming. And the stock market, for now, looks like the safer bet.
Key Takeaways
— Crypto holdings at South Korea's five major exchanges fell 50.2% to 60.6 trillion won over 13 months, Bank of Korea data shows.
— Daily trading volume plunged from 17.1 trillion won in December 2025 to 4.5 trillion won in February 2026.
— A proposed rule would auto-report all crypto transfers over 10 million won to overseas exchanges or private wallets as suspicious.
— A 22% crypto tax set for 2027 faces backlash after stock investors were exempted from similar levies.
Source: Korea Times
