According to a recent joint report by Tiger Research and Coingecko, South Korean investors are expected to shift a significant amount of cryptocurrency funds to overseas exchanges (CEXs) in 2025 due to domestic regulatory restrictions, with the estimated outflow exceeding 160 trillion won (approximately US$110 billion). The report points out that this not only causes capital outflows but also diverts transaction fee revenue to overseas exchanges, highlighting the considerable competitive pressure faced by South Korean domestic exchanges.
With limited growth in domestic exchanges, investors are turning to overseas platforms.
The South Korean cryptocurrency market has always been active, with approximately 10 million investors, representing about 20% of the national population, and trading volume comparable to global trading volume denominated in US dollars. In recent years, domestic exchanges such as Upbit and Bithumb have grown rapidly, generating trillions of won in revenue and establishing cryptocurrency as one of the country's main investment assets.
However, the growth of domestic exchanges is gradually slowing down. The report points out that while South Korean investors continue to trade actively, the trading platforms are changing. More and more investors are choosing overseas exchanges, such as Binance and Bybit, instead of domestic CEXs. From January to September 2025 alone, approximately 124 trillion won flowed from domestic exchanges to overseas exchanges, and the total outflow for the whole year could reach 160 trillion won.
Transaction fee income follows capital outflow
Along with capital outflows, transaction fee revenue also flows to overseas exchanges. The report estimates that in 2025, South Korean investors will generate the following transaction fee revenue from overseas trading: Binance approximately 2.73 trillion won, Bybit approximately 1.12 trillion won, OKX 580 billion won, Bitget 270 billion won, and Huobi 70 billion won. These five overseas exchanges combined will generate approximately 4.77 trillion won (approximately US$3.36 billion), 2.7 times the total revenue of the five largest domestic exchanges last year (1.78 trillion won).
The report points out that this shows the profit structure of South Korea's crypto industry is gradually shifting overseas, and it's not just a matter of capital outflow.
Investor strategies and the competitiveness of overseas exchanges are driving accelerated outflows.
The report points out that South Korean investors have a long-standing preference for trading Altcoin, with Altcoin accounting for 70-80% of domestic trading volume, far exceeding the global average of 50%. However, recently, most Altcoin have peaked and fallen rapidly after token offerings (TGEs), and listings on domestic exchanges often lag behind overseas markets, leading investors to prefer buying on overseas exchanges first and then selling for profit when listed on domestic exchanges.
Furthermore, overseas exchanges offer leveraged derivatives, futures contracts, and TGE pre-sale markets, which can quickly attract investors. In contrast, domestic exchanges, constrained by strict regulations and spot listing procedures, cannot offer the same products, resulting in a structural expansion of capital outflows.
South Korean government's response
Tiger Research points out that simply blocking overseas exchanges or strengthening regulations may not be effective in stopping capital outflows. Funds may turn to decentralized exchanges (DEXs) or perpetual contract exchanges (Perp DEXs), which are not subject to KYC restrictions and offer fast trading speeds and high liquidity.
The report recommends that South Korea adopt a more flexible regulatory framework that can protect investors, support innovation and product diversification, avoid excessive enforcement that pushes funds and transactions outside of regulation, and enhance the global competitiveness of the domestic crypto industry.
