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Seoul's Move: Could Crypto Change South Korea's Economy in the Future?

Intermediate

2025-07-31 | 20m

On December 3, 2024, as former President Yoon Suk-yeol declared martial law and deployed troops to the National Assembly, a seismic shift unfolded in South Korea’s financial landscape. Within hours of the announcement, traffic on domestic cryptocurrency exchanges surged elevenfold, peaking at 1.1 million concurrent users — a panic-driven response that foreshadowed a policy revolution. This political crisis, culminating in Yoon’s impeachment and Lee Jae-myung’s rise to power, ignited the most aggressive cryptocurrency regulatory overhaul in the world. Today, with 16 million crypto holders (32% of the population) eclipsing stock investors for the first time in history, South Korea is pioneering a blueprint for economic revival through digital assets.

How About South Korea?

Before we go into more details, there is one thing we need to explain about South Korea: South Korea is a technologically advanced economy, where the public is widely aware of cryptocurrencies, and it is also facing structural economic problems that are difficult to solve with traditional monetary policies. Cryptocurrencies not only provide a solution to alleviate the current economic pressure, but also lay the foundation for building long-term competitive advantages.

The number of people holding cryptocurrency accounts in South Korea has now reached 16 million, exceeding the number of stock investors in the country, which is 14.1 million. This is the first time in South Korea’s history that retail participation in digital assets has exceeded that of traditional stocks.

Nearly one-third of South Korea's population is involved in cryptocurrency trading, and more than half of adults under the age of 60 do so. Twenty percent of government officials disclosed cryptocurrency holdings totaling about $9.8 million. According to a report by the Hana Financial Research Institute, 27% of South Koreans aged 20 to 50 hold cryptocurrencies, and digital assets account for 14% of their financial asset portfolio.

It’s the result of years of growing cryptocurrency adoption, driven by economic pressures, a growing familiarity with the technology and a political system that ultimately chose to accommodate rather than resist the change.

Economic Foundation

South Korea's acceptance of cryptocurrencies stems from real economic pressures that traditional policy tools are unable to address. The country's GDP growth forecast for 2025 is only 0.8%, a figure that usually only appears during major financial crises. In March 2025, the youth unemployment rate rose to 7.5%, the highest since the same period in 2021.

South Korea’s national debt-to-GDP ratio is approaching 47%-48%, having risen after the pandemic but now stabilizing. South Korea’s household debt-to-GDP ratio will be 90%-94% by the end of 2024, among the highest in the world and the highest among major developed economies and Asian countries. This is in stark contrast to other major economies, where government debt often exceeds household debt. In the United States, household debt accounts for 69.2%, while government debt accounts for 128%; in Japan, government debt accounts for 248%, while household debt accounts for only 65.1%. South Korea’s inverted debt structure brings unique economic pressures: policy decisions are driven more by personal financial pressures than sovereign fiscal concerns.

When interest rates rise and economic growth stagnates, this debt burden will drag down consumer spending, which cannot be solved by monetary policy alone.

For millions of young South Koreans, cryptocurrencies represent, as researcher Eli Ilha Yune puts it, a kind of “financial desperation.” This is not out of ideological support for blockchain technology, but a realistic response to an economy with few other avenues for wealth creation. Traditional investments such as stocks offer meager returns, real estate is unaffordable, and the long-term sustainability of the national pension system is in question.

This background explains why cryptocurrency adoption in South Korea is different from other markets. While Western investors often view cryptocurrencies as a means of portfolio diversification or speculation on technology, Korean investors view them as essential financial infrastructure. The government’s cryptocurrency policy is a response to the widespread popularity of cryptocurrencies.

Lee Jae-myung’s government has developed a cryptocurrency agenda aimed at preventing South Korea’s wealth from flowing overseas through digital assets denominated in U.S. dollars. Currently, when Korean investors buy stablecoins, they mainly choose USDT or USDC, which is actually equivalent to transferring capital to the financial infrastructure controlled by the United States.

In the first quarter of 2025, South Korean cryptocurrency exchanges transferred approximately 56.8 trillion won (about 40.6 billion U.S. dollars) in digital assets overseas, of which stablecoins accounted for 26.87 trillion won (about 19.1 billion U.S. dollars), almost 47.3% of all outflows of digital assets.

Institutional Transformation

In 2017, South Korea imposed restrictions that prohibited businesses, institutions and financial companies from opening accounts on cryptocurrency exchanges due to concerns about speculation and money laundering. Only individuals can trade cryptocurrencies using verified real-name accounts. Institutional and corporate accounts are prohibited, and banks face strict compliance obligations. The current government has initiated a phased process to lift these restrictions.

In the initial phase (mid-2025), nonprofits and some public institutions are now allowed to liquidate cryptocurrencies obtained through donations or seizures, provided they meet strict compliance requirements, such as using verified real-name exchange accounts in Korean won and setting up internal review committees.

The government will extend eligibility for cryptocurrency exchange accounts to about 3,500 listed companies and professional institutional investors through a pilot program by the end of 2025. These accounts must be verified by real name and comply with strict anti-money laundering (AML) and KYC protocols. Financial authorities have announced that listed companies will eventually be allowed to directly participate in cryptocurrency trading, which will drive large-scale adoption at the corporate level.

Major domestic exchanges have launched or upgraded “institutional-grade” products, custody solutions and support services to meet the likely growing demand from large corporations and professional investors.

Currently, traditional financial institutions such as banks, asset managers and brokers are still excluded from direct cryptocurrency trading. This setup ensures that the first wave of institutional cryptocurrency activity in South Korea will be led by non-financial companies, which may give them a competitive advantage when the regulatory door opens further.

Political Recognition

Lee Jae-myung's cryptocurrency agenda has gained broad political support, not just within his Democratic Party. During recent campaigns, both major parties pledged to legalize cryptocurrency ETFs, a rare moment of bipartisan consensus in South Korean politics. The Financial Services Commission, which had previously opposed discussing cryptocurrency ETFs, has now submitted a roadmap to approve spot Bitcoin ETFs and spot Ethereum ETFs by the end of 2025.

The political shift reflects how cryptocurrency has become an important voter issue. South Korea’s more than 16 million cryptocurrency holders account for about a third of the country’s total population, and digital asset policy has moved from a niche technology policy to a mainstream political issue.

The government is also taking broader steps to support cryptocurrency businesses. The Ministry of Small, Medium and Startups announced plans to lift restrictions that would no longer prevent cryptocurrency companies from obtaining venture business status, allowing them to enjoy significant tax benefits, including a 50% reduction in corporate income tax for five years and a 75% reduction in real estate purchase tax.

South Korean investors have reacted enthusiastically to these policy developments. Bank stocks surged after the stablecoin trademark applications were filed. Kakao Bank’s stock price rose 19.3% the day after it filed a cryptocurrency-related trademark application, and KB Financial Group’s stock price rose 13.38% after a similar application.

Even more striking is that in June 2025, South Korean retail investors poured nearly $450 million into Circle Group shares, making it the most sought-after overseas stock that month. Since its listing in June, Circle's stock price has risen by more than 500% as South Korean investors see it as a bellwether for global stablecoin applications.

This investment model reflects investors’ deep understanding of how South Korea’s stablecoin policy can drive global stablecoin infrastructure demand. South Korean investors are planning for South Korea’s potential influence on the global digital asset market.

Lee Jae-myung's cryptocurrency strategy faces huge external pressure. U.S. President Donald Trump has threatened to impose tariffs of up to 50%, which could severely hit South Korea's export-dependent economy. With exports accounting for 40% of GDP, trade disruptions could trigger a recession, limiting the funds available for cryptocurrency investment no matter how well regulated it is.

The time crunch has created a race between policy implementation and a worsening economy. South Korean authorities are rushing to build cryptocurrency infrastructure in case potential trade conflicts make the economic environment too difficult and hinder new investment initiatives.

Domestically, the central bank’s opposition to private stablecoins could spark ongoing regulatory tensions. South Korean bank officials prefer to keep stablecoin issuance under banking regulations rather than allow tech companies to enter the monetary infrastructure space.

Tax policies have also yet to be determined. A planned 20% capital gains tax on cryptocurrency gains exceeding 2.5 million won in annual profits has been postponed several times but is still scheduled to be implemented. How this tax interacts with new corporate cryptocurrency entry rules will affect institutional adoption patterns.

The global impact of South Korea’s cryptocurrency policy is being closely watched by the international community and could serve as a model for other countries facing similar economic pressures and technology adoption models. The combination of regulatory clarity, institutional access, and local stablecoin infrastructure constitutes a comprehensive solution for digital asset integration.

If successful, the South Korean model could influence policymaking in other Asian economies and provide a template for countries that want to maintain monetary sovereignty while embracing digital asset innovation.

South Korea’s Crypto Participation Reaches Record Highs in 2025

South Korea has crossed a significant milestone in digital asset adoption. More than 16 million residents—nearly one-third of the country’s population—now hold accounts with major domestic cryptocurrency exchanges. The figure, confirmed in data submitted to representative Cha Gyu-geun of the Rebuilding Korea Party, reflects a steady and sharp rise in crypto participation over the past year.

The number, drawn from Upbit, Bithumb, Coinone, Korbit, and Gopax, includes only unique users, with individuals owning multiple accounts counted once. In a country of 51.7 million people, this translates to approximately 32% of the population now involved in the cryptocurrency market.

This surge positions crypto ahead of traditional equities in terms of retail investor engagement. South Korea’s Securities Depository reported 14.1 million individual stock investors as of December 2024, underscoring a notable shift in where the public is directing its capital.

Post-Election Surge Fuels Crypto Momentum

The growth in users is not only large but also rapid. In March 2024, the number of South Korean crypto investors first surpassed 14 million. That momentum accelerated following the November 2024 U.S. presidential election. In the weeks after Donald Trump’s victory, more than 500,000 South Koreans reportedly opened new crypto exchange accounts, pushing the total to 15.6 million.

As of late February 2025, that number had climbed past 16.2 million.

This increase occurred as cryptocurrency markets experienced significant fluctuations, but the drop in prices appears to have been viewed by many in South Korea not as a deterrent, but as an entry point.

The Size of the Market and User Base Continues to Expand

Data provided in the March 30 report from Yonhap News Agency shows that the 16 million users collectively hold 102.6 trillion South Koreans won—equivalent to approximately $70.3 billion in crypto assets. This volume is significant not just in national terms but globally, putting South Korea among the most active countries in retail crypto ownership.

Industry officials, while noting that the market may appear crowded, argue that growth potential remains. One perspective, paraphrased from local industry commentary, suggests that although participation has reached unprecedented levels, the cryptocurrency sector still offers more headroom than South Korea’s mature stock market.

The idea is that while equities have long been a default choice for retail investors, crypto offers new technologies, asset classes, and financial models that attract younger generations and risk-tolerant investors seeking more aggressive returns or portfolio diversification.

South Korea’s Position in the Global Crypto Ecosystem

South Korea has long played an influential role in the global cryptocurrency economy. Its exchanges routinely rank among the world’s highest in trading volume. The country has also been an early adopter of digital innovation across sectors including mobile payments, gaming, and broadband infrastructure. In that sense, its adoption of cryptocurrency fits within a broader trend of technological enthusiasm.

The current level of participation places South Korea in a unique position. Unlike some countries where crypto adoption has been driven primarily by inflationary pressures or currency instability, South Korean users are entering a market already familiar with advanced digital finance platforms and high-speed trading infrastructure.

This environment has helped cryptocurrency adoption expand from niche communities to the mainstream. Consumers can access crypto markets with the same ease as they trade stocks or conduct mobile banking. The user experience is streamlined, and exchanges have become more intuitive, secure, and regulated over time.

Stablecoin Battlefield: A Currency Breakthrough Against the US Dollar Hegemony

A core strategy of the Lee Jae-myung administration is to stem the annual outflow of tens of billions of dollars through US dollar-denominated stablecoins. In the first quarter of 2025, nearly half of the $40.6 billion in digital assets transferred overseas from South Korean exchanges went to USDT and USDC. Ironically, this coincided with a 6.5% appreciation of the Korean won against the US dollar. This capital flight stemmed solely from the lack of a local stablecoin.To this end, South Korea's eight major banks formed a consortium to develop a Korean won stablecoin, " CARD KRW ," with a target launch by the end of 2025. Meanwhile, on July 28, the ruling Democratic Party submitted the "Act on the Issuance and Circulation of Stable Value Digital Assets," requiring issuers to be financial institutions with capital exceeding 500 million won (US$3.7 million) and requiring the stablecoin to be 100% backed by highly liquid assets such as cash and government bonds. The bill's most controversial provision is its prohibition on interest payments —an attempt to prevent stablecoins from becoming "shadow banking" and disrupting the traditional financial system. However, the opposition People's Power Party advocates allowing interest payments, arguing that this is necessary to promote the globalization of the Korean won stablecoin.The Bank of Korea issued a stern warning, with its union leader, Kang Young-dae, stating that private stablecoins could lead to a " bank run ." The bank also suspended its central bank digital currency (CBDC) program, citing "private solutions as sufficiently efficient." However, under pressure, the central bank established a new "Virtual Assets Department" on July 30th, attempting to strike a balance between innovation and regulation.

Public Officials and Crypto Ownership

Another indicator of widespread adoption comes from government data. South Korea’s Ethics Commission for Government Officials reported on March 27 that 20% of surveyed public officials hold cryptocurrency assets. Of 2,047 officials covered by disclosure rules, 411 declared crypto holdings valued at approximately 14.4 billion won ($9.8 million).

This level of involvement from public officials highlights how integrated cryptocurrency has become in the country’s financial culture. It also reflects increasing acceptance among policymakers and administrators, who are no longer standing outside the ecosystem but participating directly in it.

The implications of this trend may extend into regulatory conversations, where firsthand experience could influence how laws and guidelines are shaped. At the very least, it suggests a normalization of crypto ownership even among traditionally conservative sectors of society.

What the Surge Means for Fintech and Beyond

The intersection of crypto growth and financial innovation is a key area of focus for observers of the South Korean market. As more people engage with digital assets, they inevitably engage with financial technologies that power these platforms—ranging from blockchain-based wallets to AI-driven trading tools and mobile-first onboarding systems.

This ties directly into the broader evolution of fintech in the region. South Korea’s expanding crypto user base strengthens the demand for scalable, secure, and user-friendly fintech infrastructure. Exchanges are no longer just trading platforms. They are full-scale fintech hubs offering lending, staking, custody, and payment solutions.

Moreover, the behavioral shift in where consumers place their capital—away from traditional equities and into crypto—signals to fintech firms that innovation must center on flexibility, asset diversity, and transparency. In this way, crypto growth is not only changing the investment habits of individuals but also influencing how financial technology firms build and deliver services.

Outlook: 20 Million Crypto Users by Year-End?

Looking ahead, there is growing speculation that the number of crypto users in South Korea could reach 20 million by the end of 2025. While the pace of growth may slow, the trend remains positive. Industry insiders note that adoption often follows psychological thresholds—once participation exceeds 30%, others may join based on social proof, platform incentives, or market opportunities.

However, with such a large portion of the population already involved, further expansion may require differentiation. Exchanges will likely need to offer new products, better education, and improved user experiences to maintain momentum. There may also be increased pressure to address concerns around security, tax reporting, and regulatory compliance.

For now, though, the upward trajectory is holding. South Korea has made a bold statement through its collective actions: cryptocurrency is no longer a speculative experiment but a central pillar of personal finance for millions.

Conclusion

The latest data confirms what has been building for years— cryptocurrency is now a mainstream financial asset in South Korea. With over 16 million unique users and crypto holdings surpassing traditional stock ownership in raw user count, the country stands at the forefront of retail digital asset adoption.

Whether the market has truly reached a saturation point remains to be seen. But one fact is clear: crypto is no longer a fringe market in South Korea. It is a primary investment choice, and for millions, it’s also a reflection of a changing financial identity.

If current trends continue, South Korea’s experience may serve as a blueprint for how digital assets can integrate with regulated finance, shape fintech development, and shift the behavior of investors at a national scale.

Reference:

Panewslab. (2025). Article on South Korea's crypto policies. PANews. Retrieved July 31, 2025, from https://www.panewslab.com/en/articles/1csafn9q

CoinCatch Team

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Disclaimer:

Digital asset prices carry high market risk and price volatility. You should carefully consider your investment experience, financial situation, investment objectives, and risk tolerance. CoinCatch is not responsible for any losses that may occur. This article should not be considered financial advice.

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