Key Points Summary
South Korea's cryptocurrency trading volume remains high, attracting global attention, but unclear regulations and lack of guidance hinder industry development.
The government's ban on setting up cryptocurrency trading real-name accounts for businesses, combined with an ambiguous regulatory framework, has led to an outflow of talent, capital, and companies, weakening the competitiveness of the Web3 ecosystem.
As the global Web3 industry is expected to grow rapidly under the Trump administration, South Korea must reform its regulatory policies to ensure the long-term sustainability of the industry.
1. Background
The inauguration of crypto-friendly President Trump and the establishment of the U.S. Securities and Exchange Commission's (SEC) Crypto 2.0 TF will accelerate the structural transformation of the global Web3 market. This is a critical turning point. Talent, capital, and companies may migrate to countries with sound regulatory frameworks, and the outflow from countries with regulatory uncertainty will intensify.
Capital inflow/outflow situation in 2024, data source: Henry & Partners
South Korea is also part of this trend. A report by Henry & Partners, "2024 Private Wealth Migration Report," shows that South Korea ranks first in Asia in terms of high-net-worth individual migration. Economic, social, and cultural factors have driven this migration wave. Although not directly related to the Web3 industry, these individuals often act like the canary in the coal mine, signaling changes in a country's business environment.
In this context, it is crucial to re-examine South Korea's Web3 industry. This report explores the flow of capital, companies, and talent in the South Korean Web3 market and the key challenges the industry must address.
2. Capital Outflow: Offshore Exchanges and Accelerated On-Chain Transfers
South Korea's cryptocurrency market has grown rapidly. There are 15.6 million cryptocurrency investors with assets worth $73 billion. The daily trading volume of cryptocurrency exchanges is now comparable to the combined trading volume of the Korea Composite Stock Price Index (KOSPI) and the Korea Startup Market (KOSDAQ). This reflects the enthusiasm of South Korean investors for crypto assets, driven by low stock market returns and political instability related to martial law.
However, the recent outflow of crypto assets has reached concerning levels. During the martial law period, service disruptions at major local exchanges undermined people's trust in the stability of these platforms. At the same time, the diversified investment opportunities offered by foreign exchanges and decentralized finance (DeFi) have further driven capital migration.
A 2024 first-half survey by the Financial Services Commission of South Korea on Virtual Asset Service Providers (VASPs) showed a 2.3-fold year-on-year increase in fund transfers to overseas VASP wallets. On-chain data confirms this trend, indicating a continuous increase in asset migration from local exchanges to foreign platforms.
In the long run, capital migration could harm South Korea's Web3 industry. Trading fees and service revenue flowing overseas weaken the competitiveness of the domestic ecosystem and reduce investor protection. This also raises concerns about declining demand for the Korean won and increased volatility in its value.
3. Migration Wave: Relocating Headquarters to Crypto-Friendly Countries
South Korean Web3 companies are accelerating their offshore migration. In 2024, Nexpace, the blockchain division of Nexon, as well as the Kaia Foundation of Klaytn and Line Finschia, relocated to Abu Dhabi. WeMade's Wemix moved to Dubai. The Web3 industry is rapidly shifting to countries with clearer and more favorable regulations.
South Korea faces several obstacles in promoting Web3-related businesses. Companies are unable to open company accounts for cryptocurrency trading, making the use of crypto assets difficult. This adds complexity to the monetization of crypto assets and creates issues in accounting, taxation, and business operations. For example, in a cryptocurrency payment business, Company A may receive crypto assets from consumers and need to settle payments with vendors in Korean won. Without a company account, it is almost impossible to monetize the assets.
Although South Korea has established a regulatory framework, the lack of specific guidelines for stablecoins, DeFi, and Web3 games has limited industry growth. The country's proactive regulatory approach restricts unlicensed businesses. In contrast, the global market benefits from regulatory sandboxes that support various pilot projects.
The Trump administration's stance on cryptocurrencies may highlight this difference, and the more favorable regulatory environment overseas could accelerate the migration of Web3 companies from South Korea.
4. Talent Outflow: Weakening the Technical Competitiveness of the Web3 Industry
The relocation of South Korean Web3 companies to other countries could have a negative impact on the domestic Web3 talent pool. As companies move to countries with clearer and more favorable regulations, employment opportunities within the country may decrease, leading to a talent drain. This could hinder the development of the domestic Web3 ecosystem.
Talent migration is not just a Web3 industry issue for South Korea. South Korea is one of the countries with the highest proportion of key talent migrating to the United States, particularly those with master's and doctoral degrees. This trend is particularly pronounced in the technology-dependent Web3 industry, potentially undermining its competitiveness.
In contrast, countries like the United States and the United Arab Emirates are promoting the development of their Web3 industries through clear regulations and supportive policies. South Korea's ambiguous regulatory environment is accelerating the loss of talent, posing a long-term threat to the country's technological competitiveness and industrial ecosystem.
5. Challenges and Opportunities for the South Korean Web3 Market in 2025: Regulatory Reform and Industry Growth
South Korea is globally recognized for its cryptocurrency trading volume. However, this trading volume has not translated into industry development, making the country a liquidity channel for global traders. This structure is not conducive to sustainable growth. South Korea urgently needs to make progress in both business and technology to strengthen its Web3 ecosystem.
Source: Arthur Hayes
Due to a lack of domestic innovation and regulatory uncertainty, South Korea is on the periphery of global Web3 development. This over-reliance on trading volume rather than ecosystem building has led to a "Korea discount" in the international market.
In 2025, with a new government in power, major changes are expected in the global industry. Within these changes, South Korea stands at a critical crossroads. Positive initiatives include allowing cryptocurrency operators to open company accounts, developing stablecoin regulations, and advancing cryptocurrency legislation. However, these efforts only scratch the surface.
To make progress, South Korea must address risks, analyze global policy shifts, and develop a regulatory framework tailored to domestic conditions. South Korea must shift from a sole focus on trading volume to building a sustainable innovation hub characterized by excellence in business and technical leadership.
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