# South Korea: High Crypto Trading Volume Grabs Global Attention, but Regulatory Hurdles Impede Growth

South Korea, renowned for its substantial cryptocurrency trading volumes, finds its industry development stymied by a lack of clear regulatory guidance and supportive environments. These regulatory challenges, coupled with the absence of corporate bank accounts for cryptocurrency operations, risk triggering an exodus of talent, capital, and enterprises, thereby constraining the growth of the Web3 ecosystem and diminishing global competitiveness.

As the Trump administration’s policies are poised to accelerate changes in the global Web3 industry, South Korea must refine its regulatory environment and ensure the sector’s sustainability to maintain a competitive edge.

# Introduction

With the inauguration of ‘Crypto President’ Trump and the launch of the U.S. Securities and Exchange Commission’s (SEC) Crypto 2.0 Task Force, structural changes in the global Web3 market are projected to intensify. Countries with comprehensive regulatory frameworks will likely attract significant capital, talent, and companies, while those with ambiguous regulations may experience a more pronounced exodus.

South Korea is not immune to these shifts. According to Henry & Partners’ “2024 Wealth Migration Report,” South Korea’s ultra-high net worth individuals are leading the migration trend in Asia. While this trend is influenced by multifactorial economic, social, and cultural elements, their departure highlights the sensitive response of the business environment to regulatory and market changes.

Reassessing the current status of the South Korean Web3 industry is crucial. This report will analyze the state of capital, enterprises, and talent in the domestic Web3 market and identify the challenges confronting the industry.

# Capital Flight: Accelerating Shift to Overseas Exchanges and On-Chain

The domestic cryptocurrency market in South Korea has seen rapid growth. With approximately 15.6 million local investors holding around $73 billion in assets, the daily trading volume on local exchanges matches the combined volume of the KOSPI and KOSDAQ exchanges. Despite poor stock market performance and political instability translating into reduced stock market allure, the fervor for cryptocurrencies among domestic investors remains inexplicable.

While this enthusiasm fosters positive growth in the South Korean Web3 sector, the recent surge in capital outflow is concerning. Server outages during martial law periods have severely diminished the credibility of local exchanges, while the diverse investment opportunities offered by overseas exchanges and decentralized finance (DeFi) platforms have further propelled capital flight.

The Financial Services Commission’s 2024 H1 Cryptocurrency Status Report indicates that funds moving to foreign wallets have surged by approximately 2.3 times year-on-year. On-chain data corroborates this trend, showing a steady transfer of assets from local to overseas exchanges.

Long-term, this capital exodus could negatively impact the domestic Web3 industry by draining transaction fees and service revenue overseas, thus weakening the local ecosystem and compromising investor protection frameworks. Additionally, concerns about decreased demand for the won and increased volatility arise from this capital outflow.

# Corporate Relocation: Moving Headquarters to Crypto-Friendly Jurisdictions

The relocation of South Korean Web3 firms to friendlier regulatory environments is accelerating. In 2024, Nexon’s blockchain arm Nexplore, Klaytn and LINE FINCIIA’s KAI Foundation shifted their bases to Abu Dhabi, while Wemade’s WEMIX moved to Dubai, showcasing a clear trend towards moving operations to countries with supportive regulatory frameworks.

Conversely, multiple restrictions hinder Web3 business operations in South Korea, such as the inability to open corporate bank accounts for cryptocurrency operations. This complicates the off-ramp process, creating hurdles for accounting, taxation, and operational aspects of cryptocurrency businesses. For instance, in a cryptocurrency payment business, if a business receives crypto assets from customers and needs to pay vendors in won, the off-ramping process becomes virtually impossible without a corporate account.

Furthermore, regulations and guidelines for major Web3 sectors such as stablecoins, DeFi, and Web3 gaming are insufficient. South Korea’s positive regulation approach, which disallows any non-explicitly permitted businesses, contrasts sharply with the dynamic regulatory sandbox environments found in global markets.

Under Trump’s administration, the regulatory gap is poised to widen. The importance of a regulatory-friendly environment in the global market is likely to amplify, propelling Web3 companies to relocate to jurisdictions with clearer regulations.

# Talent Drain: Concerns Over Weakening Web3 Technical Competitiveness

The overseas relocation of South Korean Web3 companies could adversely affect the local talent pool. As firms move to countries with clearer and friendlier regulations, domestic job opportunities may dwindle, causing an industry contraction. This trend could lead to a brain drain, significantly impeding the development of the domestic Web3 ecosystem.

The exodus of elite talent is a pervasive issue extending beyond the Web3 sector, with South Korea exhibiting the highest per capita emigration rate of Ph.D.-level experts to the U.S.—approximately tenfold compared to India or China. This trend is more pronounced in the Web3 sector, a technology-driven ecosystem, thereby diminishing industrial competitiveness.

Globally, nations like the U.S. and UAE are nurturing the Web3 industry through clear regulations and proactive policies. In contrast, South Korea’s ambiguous regulatory environment exacerbates the talent drain, posing a severe long-term threat to the country’s technological competitiveness and industrial ecosystem.

# What Lies Ahead for South Korea’s Web3 Market in 2025?

South Korea’s substantial cryptocurrency trading volume has drawn global attention. However, this volume-driven influence does not translate into industry development, serving merely as a liquidity hub for global traders. This structure fails to guarantee sustainable growth, necessitating efforts to achieve business and technological milestones to fortify the industry ecosystem.

Notably, South Korea’s continued marginalization in the Web3 industry underscores the need for fundamental changes. The absence of Korean builders and unclear regulatory settings stifle innovation and growth within Web3 companies. Relying solely on volume growth compromises long-term competitiveness and exacerbates the ‘Korea Discount’ in the global market.

By 2025, significant transformations are expected following the Trump administration’s industrial policies. South Korea stands at a crucial crossroads. Positive signals include allowing corporate bank accounts for cryptocurrency operations, recognizing the necessity for stablecoin regulatory frameworks, and planning to legislate a second phase of cryptocurrency laws by late 2025. Nevertheless, these are merely initial steps.

To mitigate inherent risks and align with global policy changes, South Korea must swiftly establish a suitable regulatory framework. This will enable a shift from liquidity-driven influence to a robust, sustainable industry ecosystem underpinned by business and technological achievements.

*This article is an excerpt from the comprehensive report “Korea Exodus: Capital, Talent, and Corporate Departure” by Tiger Research, a global Web3 specialist research organization partnered with Blockmedia. The full report is available on the official Tiger Research website.