South Koreans moved more than 160 trillion won ($110 billion) from local cryptocurrency exchanges to foreign platforms last year due to regulatory restrictions in the country, one of Asia’s most active digital asset markets, a joint report from Coingecko and Tiger Research said on Friday.
The regulatory framework has been slow to develop. In December, the long-awaited Digital Asset Base Act (DABA), a comprehensive framework designed to govern cryptocurrency trading and issuance, was delayed due to disagreements among regulators over stablecoin issuance. The Virtual Asset User Protection Act, which takes effect in 2024, does not address market structure issues such as leverage or derivatives trading.
The regulatory gap has raised concerns among market participants that South Korea’s centralized cryptocurrency exchanges (CEXs) are increasingly unable to compete with offshore platforms offering more complex trading products.
South Korean news agency Aju Press reported in November that “the number of South Korean investors holding large sums of money in overseas cryptocurrency trading accounts has more than doubled in a year, reflecting both a recovery in global markets and growing dissatisfaction with South Korea’s restrictive trading environment.”
Cryptocurrencies have become South Korea’s main investment asset, with the number of investors rising to 10 million and exchanges such as Upbit and Bithumb generating trillions of won in revenue, the study found.
However, growth has stalled, the report said, although Korean investors continue to actively trade cryptocurrencies and increasingly turn to foreign platforms such as Binance and Bybit.
The report stated that the main reason for Korean investors to move funds overseas is the gap in investment opportunities, as South Korea prohibits domestic exchanges from offering crypto derivatives to retail traders.
“Domestic central exchanges face strict regulations that restrict them from spot trading, while foreign central exchanges fill the gap with more complex products, including leveraged derivatives,” the report said.
