Author: Ariel, CryptoCity
South Korea’s Crypto Market Value Halved Amidst Soaring Stock Market
A significant shift in investment sentiment is sweeping across South Korea, as the value of cryptocurrency holdings among investors has dramatically contracted over the past year. Is the allure of traditional stocks now overshadowing digital assets?
According to a report by The Chosun Ilbo, data submitted by the Bank of Korea to Member of Parliament Cha Kyu-geun reveals a staggering decline. The total value of cryptocurrency holdings in South Korea plummeted from KRW 121.8 trillion (approximately USD 83.3 billion) at the end of January 2025 to KRW 60.6 trillion (approximately USD 41.4 billion) by the end of February 2026, marking a drastic 50% reduction.
Beyond this significant asset depreciation, the overall market’s trading enthusiasm has also cooled considerably. The combined daily trading volume across South Korea’s five largest cryptocurrency exchanges—Upbit, Bithumb, Korbit, Coinone, and Gopax—nosedived from USD 11.6 billion in December 2024 to approximately USD 3 billion by February 2026.
Concurrently, the Korean Won (KRW) deposits held by investors on exchanges, typically serving as margin for trading, also decreased from KRW 10.7 trillion at the end of 2024 to KRW 7.8 trillion. This trend underscores a substantial reduction in retail investor activity and capital demand within the cryptocurrency market.
KOSPI Soars Over 80% as Robust Stock Market Attracts Capital
The substantial capital outflow from South Korea’s crypto market is largely attributable to two converging factors: a downturn in cryptocurrency prices and an unprecedented boom in the domestic stock market. Fueled by the AI and semiconductor frenzy, the local equities market has reached new highs, creating a powerful “money-attracting” effect.
Enticed by the lucrative returns offered by the stock market, a significant number of retail and foreign investors have progressively shifted their funds from volatile cryptocurrency assets to traditional equities.
As reported by Business Insider, investment banking giant Goldman Sachs has designated South Korea as its top preferred market in Asia, assigning an “overweight” rating. The firm further raised its 12-month target price for South Korea’s KOSPI index from 8,000 to 9,000 points.
The KOSPI index has demonstrated an astonishing rally throughout 2026, recently breaching the 7,000-point mark. On May 11, it continued its upward trajectory, surging to 7,854 points at the time of writing, accumulating an impressive year-to-date gain of over 80%.
Calculated from the beginning of 2025, the KOSPI index has more than tripled. This robust bull market momentum is primarily driven by the colossal demand for memory chips from the AI industry, significantly benefiting global market leaders like Samsung and SK Hynix.
Goldman Sachs projects that this strong demand will propel hardware and semiconductor-related stocks, leading to an extraordinary 300% profit growth for South Korean companies in 2026.
South Korea’s Crypto Tax Policy Sparks Controversy and Market Concerns
Adding further headwinds to the beleaguered crypto market are South Korea’s increasingly stringent regulatory and taxation policies, which are exerting considerable pressure on the industry.
According to local media outlet The Elec, South Korea’s financial regulatory body has proposed strengthening anti-money laundering (AML) regulations. The plan aims to flag all transfer transactions exceeding KRW 10 million that involve overseas exchanges or private wallets as suspicious. This new regulation is anticipated to take effect as early as August 2026.
The Digital Asset eXchange Alliance (DAXA), representing 27 registered industry players, has issued a warning. They contend that if implemented, this rule would cause the number of suspicious transaction reports from the five major exchanges to skyrocket by 85 times, reaching 5.4 million cases. Such an increase would pose immense practical challenges for compliance operations.
Compounding these concerns, the South Korean Ministry of Economy and Finance has reiterated its commitment to levying a 22% tax on annual crypto trading profits exceeding KRW 2.5 million, effective January 1, 2027. This decision has ignited a fierce debate regarding fairness.
Critics point out that the South Korean government previously abolished the financial investment income tax, granting stock investors tax exemptions, while cryptocurrencies remain subject to taxation. Oh Moon-sung, head of the Korea Tax Policy Association, has urged the government to address issues of inadequate infrastructure, such as establishing clear valuation standards for airdropped tokens, before proceeding with tax implementation.
Despite industry calls for more robust technical and systemic safeguards, Moon Kyung-ho, an official from the Ministry of Economy and Finance, emphasized that the government is actively coordinating implementation details with exchanges. Related administrative guidelines are expected to be released this year, ensuring the tax plan progresses as scheduled.
As capital continues to exit and regulatory scrutiny intensifies, South Korea’s evolving regulatory environment is poised to further test the future development of its cryptocurrency industry.
(The above content is an authorized excerpt and reprint from our partner CryptoCity. The original article can be found here.)
Disclaimer: This article is for market information purposes only. All content and views are for reference only and do not constitute investment advice. They do not represent the views or positions of BlockTempo. Investors should make their own decisions and trades. The author and BlockTempo shall not bear any responsibility for direct or indirect losses incurred by investors’ transactions.
