$110B in Crypto Flees South Korea in 2025 as Strict Trading Rules Push Investors Offshore

3 2 minutes read

South Korea witnessed a significant outflow of cryptocurrencies in 2025, with over $110 billion worth of assets moving from local exchanges to overseas platforms. This mass exodus was primarily driven by stringent domestic trading regulations that limit the offerings of local exchanges. Despite the high level of crypto adoption in the country, delays in updating regulations and disagreements over stablecoins have led many traders to explore investment opportunities in foreign markets.

The sluggish pace of crypto regulations in South Korea has failed to keep up with the rapidly evolving market. The much-anticipated Digital Asset Basic Act, scheduled for December, was postponed due to regulatory disagreements regarding the treatment of stablecoins. Additionally, the Virtual Asset User Protection Act, implemented in 2024, lacks coverage in critical areas such as leverage and derivatives trading.

The CoinGecko and Tiger Research report highlighted that domestic crypto exchanges in South Korea are constrained by strict regulations that confine them to spot trading. In contrast, foreign exchanges offer a broader array of products, including leveraged derivatives, filling the gap left by local exchanges. This regulatory ambiguity has raised concerns about the competitiveness of South Korea’s exchanges against their overseas counterparts.

Despite approximately 10 million people in South Korea investing in cryptocurrencies and local exchanges like Upbit and Bithumb generating substantial revenues, growth in the sector is stagnating. Many Korean investors are still actively trading but are increasingly turning to foreign platforms like Binance and Bybit. The primary reason for this shift is the inability of local exchanges to provide products like crypto derivatives to retail traders.

In response to vague regulations, South Korean authorities have begun imposing hefty fines on local exchanges. Recently, Bithumb, the country’s second-largest cryptocurrency exchange, underwent an inspection by the Financial Intelligence Unit (FIU) in March 2025 and was penalized for violating anti-money laundering (AML) regulations. The FIU identified several compliance issues, including deficiencies in AML protocols, weak know-your-customer (KYC) checks, and discrepancies in reporting suspicious transactions.

It is anticipated that Bithumb will face a substantial penalty, potentially surpassing Upbit’s $25 million fine, considering Bithumb’s significant market share and a thorough review of its order book. The Financial Intelligence Unit has ramped up oversight of major exchanges in South Korea to enforce AML and KYC regulations more rigorously. These penalties are part of a series of inspections involving the country’s “Big Five” exchanges: Upbit, Bithumb, Coinone, Korbit, and GOPAX.

In conclusion, the evolving regulatory landscape and enforcement actions in South Korea have significantly impacted the local crypto industry, prompting investors to seek opportunities on international platforms. The industry faces challenges in adapting to changing regulations and maintaining competitiveness against foreign exchanges. It is essential for stakeholders to collaborate and navigate these challenges to ensure the sustainable growth of the crypto ecosystem in South Korea.

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