Key Insights:

• South Korea’s crypto market capitalization surges to $32.4B, driven by increased trading volumes and a growing user base.
• Active crypto trading users in South Korea reached 6.45 million, with individual investors leading the surge.
• New regulations are set to enhance user protection as South Korea’s crypto market continues to expand and attract global attention.

The South Korean cryptocurrency market has surged to a valuation of $32.4 billion, bolstered by increased trading activities and a growing user base. This rise coincides with Bitcoin’s recovery to $66,000, following a brief dip to below $57,000. The local crypto exchanges experienced substantial growth, mirroring the global trend of rising digital asset prices.

Reports from the South Korean Financial Intelligence Unit (KoFIU) indicate that the market capitalization of the country’s virtual assets sector saw a remarkable increase. In the latter half of 2023, the capitalization grew by 43.6 trillion won ($32.4 billion), reflecting a robust 53% rise compared to the first half of the year. This growth was predominantly recorded by licensed exchanges such as Upbit, Bithumb, Coinone, Korbit, and Gopax.

Daily trading volume also saw an uptick, with domestic virtual asset trading reaching 3.6 trillion won ($2.6 billion) per day, marking a 24% increase from the previous period. However, the coin market, which deals with crypto-to-crypto transactions, experienced a decline of 44% to $30,000.

User Base Expansion and Investor Demographics

The crypto exchanges in South Korea not only saw an increase in trading volume but also a substantial rise in their user base. By the end of 2023, active users on registered exchanges grew by 390,000, reaching 6.45 million. This number accounts for over 10% of the nation’s population. The increase was mainly driven by individual investors, who made up 99% of the total active users. Among these investors, nearly 60% were aged in their 30s and 40s, indicating a strong interest from middle-aged adults.

This trend of individual investors actively engaging in the crypto market continued to push the growth of local exchanges well ahead of the global surge in early 2024. In the first quarter of 2024, the South Korean won emerged as the most traded currency against crypto-assets globally, surpassing the US dollar.

Regulatory Developments and Future Outlook

The growth of the South Korean crypto market comes as regulators prepare to implement the Virtual Asset User Protection Act in July. This new legislation aims to impose stricter requirements on exchanges and enforce tougher penalties for misconduct within the sector. The introduction of these regulations reflects the government’s commitment to ensuring a secure trading environment for investors.

Despite past challenges, such as the collapse of TerraUSD, a stablecoin created by South Korean native Do Kwon, the enthusiasm for cryptocurrency remains robust. This sentiment was further supported by a major political party’s recent pledge to provide South Koreans with access to US Bitcoin ETFs during the parliamentary elections.

Exchanges’ Financial Performance and Operational Growth

The financial performance of South Korean exchanges has also seen positive changes. Alongside the rise in market capitalization and trading volume, the operating income of these exchanges has increased. Deposits in Korean won have grown, driven by the recovery of investor sentiment and rising crypto prices.

Exchanges like Upbit have gained prominence on the global stage, occasionally ranking among the top five exchanges worldwide by trading volume. This reflects South Korea’s emerging role as a significant player in the global crypto market.

The detailed survey from KoFIU, which included data from 22 local exchanges and seven wallet and custodial service providers, highlights the dynamic nature of the South Korean crypto landscape. The report emphasizes the sector’s resilience and adaptability to market fluctuations and regulatory changes.