South Korea’s virtual currency holdings have halved in just over a year. The country’ stock market is booming to absorb funds.
Key Takeaways
- Stock prices and artificial intelligence (AI) markets absorb personal funds
- Trading volume decreases by 74%
Trading Volume in Exchanges Shrink, Decline in Crypto Prices
In a report by the Chosun Ilbo on May 5, according to data obtained by South Korean lawmaker Cha Kyu-geun from the Bank of Korea, the total amount of virtual currencies held by South Korean investors has halved from 121.8 trillion won (about 13 trillion yen) at the end of January 2025 to 60.6 trillion won (about 6.5 trillion yen) at the end of February 2026, the period cover just over 13 months.
The total daily trading volume of the five major South Korean exchanges (Upbit, Bithumb, Corbit, Coinone, and Gopax) also shrank by 74%, from approximately $11.6 billion (about 1.82 trillion yen) in December 2024 to about $3 billion (about 470 billion yen) in February 2026. Standby funds denominated in Won deposited in exchanges also decreased from 10.7 trillion won to 7.8 trillion won during the same period. This showed a cooling in investment sentiment.
In addition to the decline in prices of cryptocurrencies, there has been an outflow of funds into the stock market, which has rallied due to artificial intelligence (AI) and semiconductor stocks. KOSPI, South Korea’s main stock index, continues to reach fresh all-time highs this year, supported by increasing demand for AI and notable growth in semiconductor exports.
Tightening Anti-Money Laundering (AML) Regulations and 22% Tax Policy Overlap
There has been intense opposition to the proposed new AML regulations, led by the industry group DAXA (Digital Asset Exchange Council). The amendment proposed by the Financial Services Commission (FSC) and the Financial Intelligence Unit (FIU) at the end of March requires remittances exceeding 10 million won (approximately 1.07 million yen) to overseas exchanges be uniformly reported as suspicious transactions, with the deadline for public comment today, May 11.
DAXA, which represents 27 registered operators such as Upbit and Bithumb, estimates that if this regulation pushes through, the number of suspicious transaction reports on the five major exchanges will jump 85 times from about 63,000 last year to about 5.4 million. According to them, in practice, it will be impossible to take action. The South Korean government is aiming for a cabinet decision in July. Partial implementation is expected to begin as early as August 20, 2026.
In addition, South Korea’s Ministry of Finance and Economy has repeated that it will implement a 22% tax on cryptocurrency trading profits as scheduled from January 1, 2027. There are many that disagree in the ruling and opposition parties regarding taxation, with some pointing out the injustice of only taxing virtual currencies while the tax on capital gains on stock investments has been abolished.
During the 2021 bubble period, South Korea’s cryptocurrency market had one of the world’s largest trading volumes. Retail investor enthusiasm expanded to the point where a unique price increase called “kimchi premium” became commonplace.
Since then, as the market has developed and matured and regulations have been tightened at the same time, the structure of the stock market as taking personal money has become established. If tightened AML regulations and stricter taxation coincide, the risk of funds flowing out to offshore exchanges beyond the reach of domestic regulations has also been pointed out. The conflict between regulators and the industry is likely to continue for the foreseeable future.
