$110 Billion in Crypto Left South Korea in 2025 Owing to Strict Trading Rules

South Korean investors transferred over $110 billion in cryptocurrency to foreign exchanges in 2025 as domestic platforms faced restrictive regulations. The outflows were driven by a combination of limited product availability and delays in implementing a comprehensive digital asset framework according to reports. The financial migration was particularly notable for its scale, given South Korea's status as one of the most active crypto markets in Asia according to reports.

The Virtual Asset User Protection Act, which took effect in 2024, did not address key market structure issues such as leverage and derivatives trading. This left domestic exchanges restricted to spot trading, while foreign platforms offered a broader range of products according to analysis. The regulatory gap prompted many investors to seek out offshore services for more advanced trading options according to reports.

The stalled Digital Asset Basic Act (DABA) has further delayed the development of a clear legal framework for crypto in South Korea. Disagreements among regulators over stablecoin governance have pushed the bill's implementation into 2026 according to the report. The legislation, proposed by the ruling Democratic Party, aimed to establish a legal structure for issuing won-backed stablecoins and improve investor protections according to analysis.

Why Did This Happen?

The regulatory delays were caused by disagreements between the Financial Services Commission and the Bank of Korea over stablecoin oversight. The central bank argued that only bank-led consortia should issue stablecoins, with banks holding at least 51% ownership. The FSC, however, opposed the threshold, warning it could hinder innovation and limit the participation of technology firms according to the report.

The dispute over governance has left stablecoin issuance and broader digital asset regulation in limbo. The DABA would require stablecoin reserves to be held in licensed custodians and mandate full-reserve custody for all issuers according to the report. These requirements were not clearly outlined until now, leading to uncertainty in the market according to the report.

How Did Markets Respond?

The lack of a clear regulatory framework has led to increased enforcement actions. In December 2025, the Financial Intelligence Unit fined Korbit ₩27.3 billion for 22,000 anti-money laundering violations. The regulator found failures in customer identification, unauthorized transactions with unregistered platforms, and inadequate risk assessments according to the report.

Other major exchanges, including Upbit and Bithumb, have also faced penalties. Upbit was suspended from accepting new customers for three months in February and fined ₩35.2 billion in November according to the report. Authorities are now expanding transaction monitoring requirements, including extending the travel rule to cover crypto transfers below 1 million won according to the report.

What Are Analysts Watching Next?

The regulatory uncertainty has created contradictory guidance for asset managers. The Financial Supervisory Service issued verbal warnings restricting the proportion of crypto-related stocks in domestic ETF portfolios. However, industry participants argue that such restrictions fail to address capital outflows while creating unfair advantages for U.S.-listed crypto products according to analysis.

The Financial Action Task Force (FATF) has also highlighted the risks associated with stablecoins and crosschain activity. In a 2025 report, FATF cited the Bybit hack as the largest crypto theft ever and urged jurisdictions to tighten licensing and enforcement according to the report. The report warned that uneven global regulation could amplify illicit finance risks according to the report.

South Korea's regulatory environment continues to evolve as enforcement actions increase and policy debates persist. The government has yet to finalize a timeline for the Digital Asset Basic Act. Until then, investors may continue to seek more favorable conditions abroad according to reports.