South Korea’s $110B Crypto Exodus: Regulatory Deadlock Bleeds Capital Offshore
Capital flight hits 160 trillion won as the FSC and Bank of Korea clash over stablecoin rules, pushing the Digital Asset Basic Act to 2026.
South Korean investors moved over 160 trillion won ($115 billion) to offshore exchanges in 2025, bypassing domestic restrictions that have choked the local market’s competitiveness. A new report by Tiger Research identifies a massive capital flight to platforms like Binance and Bybit, driven by Seoul’s ban on crypto derivatives and a paralyzed legislative framework.
The Derivatives Handicap
While South Korean exchanges like Upbit and Bithumb are legally confined to spot trading, offshore competitors offer leverage and futures products that retail traders demand. The data is stark: the Tiger Research report estimates 160 trillion won in volume migrated overseas last year. This isn’t just lost volume; it is lost tax revenue and market depth. Domestic platforms are effectively fighting with one hand tied behind their backs, unable to offer the hedging tools standard in global markets.
“Simply blocking is not the answer. Capital may scatter to regulatory blind spots, and Korea needs to allow innovation within manageable boundaries.” . Tiger Research
FSC vs. BOK: The Legislative Logjam
The exodus is compounded by the indefinite delay of the Digital Asset Basic Act (DABA), now pushed to 2026. The bottleneck is a turf war between the Financial Services Commission (FSC) and the Bank of Korea (BOK). The dispute centers on stablecoin jurisdiction: the BOK insists that only bank-majority consortia should issue stablecoins, while the FSC advocates for broader participation from fintech firms to foster competition.
This regulatory limbo leaves local institutions paralyzed. While U.S. markets accelerate with ETF approvals and clear stablecoin bills, Seoul’s hesitation has created a vacuum that foreign entities are rapidly filling.
Market Signal: The Vanishing Kimchi Premium
The capital flight has decimated the infamous “Kimchi Premium,” the gap between domestic and global Bitcoin prices. Once a hallmark of insulated Korean demand (often reaching 10-15%), the premium collapsed to 0.94% on January 1, 2026. This normalization confirms that Korean liquidity is no longer trapped domestically; it has successfully migrated to global order books.
