Catenaa, Wednesday, March 25, 2026- South Korea recorded about $60 billion in cryptocurrency outflows to overseas exchanges and private wallets in the second half of 2025, as investors moved funds abroad despite rising domestic participation, according to a report released Wednesday by the Financial Services Commission.
Crypto outflows rise amid arbitrage and global demand
The FSC said total outflows reached 90 trillion won, up 14% from 78.9 trillion won in the first half of the year. Regulators said the transfers are likely tied to arbitrage and cross-border trading strategies, where investors seek price differences between local and global markets.
The shift highlights growing demand for offshore liquidity as traders look beyond domestic exchanges for pricing efficiency, derivatives access and broader asset offerings.
South Korea crypto users grow, but exchange profits fall
The number of crypto exchange accounts climbed to 11.1 million by the end of 2025, a 3% increase from midyear. Deposits rose 31% to 8.1 trillion won, showing continued retail participation.
However, exchange profitability declined sharply. The country’s 18 registered exchanges posted combined operating profits of 380.7 billion won in the second half, down 38% from the first half.
Lower trading activity contributed to the decline. Average daily trading volume fell 15% to 5.4 trillion won during the period.
Crypto market slowdown weighs on volumes and valuations
The FSC estimated South Korea’s total crypto market capitalization at 87.2 trillion won at the end of 2025, down 8% from the first half.
Global crypto markets also cooled after a peak in October 2025, when Bitcoin reached about $126,000. Prices later stabilized as geopolitical tensions and a tighter policy stance from the Federal Reserve weighed on risk assets.
The slowdown reduced trading incentives and narrowed arbitrage spreads, even as capital continued to move across borders.
Why South Korean investors are moving crypto abroad
Analysts say strict domestic regulations play a role in the outflow trend. South Korean exchanges operate under real-name verification rules and face limits on foreign participation, which can reduce liquidity compared with global platforms.
Overseas exchanges often offer more advanced products, including derivatives, yield strategies and cross-chain trading, attracting users seeking higher returns or broader exposure.
Private wallets also allow investors to hold assets outside centralized platforms, giving greater control but reducing visibility for regulators.
What the $60B crypto outflows mean for exchanges
Sustained outflows could pressure domestic exchanges as trading activity shifts offshore. Lower volumes directly affect fee-based revenue, which remains the primary income source for most platforms.
The divergence between rising deposits and falling profits suggests users are funding accounts but not trading as actively, or moving assets elsewhere after initial deposits.
This pattern may lead exchanges to expand services beyond spot trading, including staking, custody or institutional offerings, to stabilize revenue.
Regulatory outlook for crypto flows in South Korea
The FSC said it will continue monitoring cross-border crypto transfers, particularly as assets move to private wallets and decentralized platforms. Tracking such flows remains difficult due to the global and pseudonymous nature of blockchain transactions.
Future policy responses may include tighter reporting requirements or coordination with international regulators, though authorities must balance oversight with maintaining market competitiveness.
South Korea’s regulatory framework has focused on investor protection and financial stability, but global market integration is testing those boundaries.
South Korea’s crypto market and global trends
South Korea has been one of the most active cryptocurrency markets, driven by strong retail participation and high trading volumes. Regulatory reforms introduced in recent years required exchanges to partner with banks and comply with anti-money laundering rules, improving transparency but limiting the number of licensed platforms.
Historically, price gaps between domestic and global exchanges, known as the “kimchi premium,” fueled arbitrage trading. While those gaps have narrowed, cross-border strategies remain common, especially during volatile periods.
Globally, the crypto market has become more interconnected, with institutional platforms offering advanced trading tools and liquidity pools that attract capital from multiple regions. This shift has reduced the dominance of local markets and increased reliance on global infrastructure.
The $60 billion outflow underscores how digital assets move across borders with ease, challenging national regulatory frameworks and reshaping how exchanges compete in a global market.
