Summary of key points
South Korea’s high cryptocurrency trading volume has attracted global attention, but unclear regulations and a lack of guidelines have hampered the industry’s development.
The government prohibits companies from opening real-name accounts for cryptocurrency transactions. This restriction, coupled with an ambiguous regulatory framework, has led to an outflow of talent, capital, and companies, weakening the competitiveness of the Web3 ecosystem.
As the global Web3 industry is expected to grow rapidly under the Trump administration, South Korea must reform its regulatory policies to ensure the long-term sustainability of the industry.
1. Background
The inauguration of crypto-friendly President Trump and the establishment of the Crypto 2.0 TF by the US Securities and Exchange Commission (SEC) will accelerate structural changes in the global Web3 market. This is a critical turning point. Talent, capital, and businesses are likely to migrate to countries with sound regulatory frameworks, while outflows from countries with regulatory uncertainty will intensify.
Capital inflow/outflow by country in 2024, data source: Henry Partners
South Korea is also in this trend. Henry Partners Private Wealth Migration Report 2024 shows that South Korea ranks first in Asia in terms of high net worth immigration. Economic, social and cultural factors drive this immigration wave. Although not directly related to the Web3 industry, these people are often like canaries in the coal mine, foreshadowing changes in a countrys business environment.
Against this backdrop, it is crucial to revisit South Korea’s Web3 industry. This report explores the flow of capital, companies, and talent in South Korea’s Web3 market, as well as the key challenges that the industry must address.
2. Capital Outflow: Offshore Exchanges and Accelerated On-Chain Transfers
South Koreas cryptocurrency market is growing rapidly. There are 15.6 million cryptocurrency investors holding $73 billion in assets. The average daily trading volume on cryptocurrency exchanges is now comparable to the combined trading volume of the Korea Composite Stock Price Index (KOSPI) and the Korea Stock Exchange (KOSDAQ). This reflects the enthusiasm of Korean investors for crypto assets, which is driven by low stock market returns and political instability related to martial law.
However, the outflow of crypto assets has reached worrying levels recently. The disruption of services at major local exchanges during the martial law period has eroded people’s trust in the stability of these platforms. At the same time, the diversified investment opportunities provided by foreign exchanges and decentralized finance (DeFi) have further driven capital migration.
South Korea’s Financial Services Commission’s Virtual Asset Service Provider (VASP) Survey for the first half of 2024 showed that fund transfers to foreign VASP wallets increased 2.3 times year-on-year. On-chain data confirms this trend, indicating that asset migration from local exchanges to foreign platforms continues to increase.
In the long term, capital migration could harm South Korea’s Web3 industry. Transaction fees and service revenues flow abroad, weakening the competitiveness of the local ecosystem and reducing investor protection. This also raises concerns about falling demand for the won and increased volatility in its value.
3. Migration: Moving headquarters to crypto-friendly countries
South Korean Web3 companies are accelerating offshore migration. In 2024, Nexons blockchain division Nexpace and Klaytn and Line Finschias Kaia Foundation moved to Abu Dhabi. WeMades Wemix moved to Dubai. The Web3 industry is rapidly moving to countries with clearer and more favorable regulations.
South Korea faces many obstacles in promoting Web3-related businesses. Companies cannot open corporate accounts for cryptocurrency transactions, which makes it difficult to use crypto assets. This brings complexity to the monetization of crypto assets and creates problems in accounting, taxation, and business operations. For example, in a cryptocurrency payment business, Company A may receive crypto assets from consumers and need to settle payments with sellers in Korean won. Without a corporate account, monetization of assets is almost impossible.
Although South Korea has established a regulatory framework, the lack of specific guidelines for stablecoins, DeFi, and Web3 games has limited industry growth. The countrys proactive regulatory approach restricts businesses that are not explicitly licensed. In contrast, the global market benefits from regulatory sandboxes that support various demonstration projects.
The Trump administration’s stance on cryptocurrencies could highlight this difference, with a favorable regulatory environment overseas accelerating the migration of Web3 companies out of South Korea.
4. Brain drain: weakening the technical competitiveness of the Web3 industry
The relocation of Korean Web3 companies abroad could have a negative impact on the domestic Web3 talent pool. As companies move to countries with clearer and more favorable regulations, domestic job opportunities could decrease, leading to a brain drain. This could hinder the development of the domestic Web3 ecosystem.
Talent migration is not just a problem for the Web3 industry in South Korea. South Korea has one of the highest rates of migration of key talent to the United States, especially those with masters and doctoral degrees. This trend is particularly evident in the technology-reliant Web3 industry, which could hurt the industrys competitiveness.
In contrast, countries such as the United States and the UAE promote the development of their Web3 industries through clear regulations and supportive policies. South Korea’s unclear regulatory environment has accelerated the brain drain, which poses a long-term threat to South Korea’s technological competitiveness and industrial ecosystem.
5. Challenges and opportunities of the Korean Web3 market in 2025: regulatory reform and industry growth
South Korea has received global attention for its cryptocurrency trading volume. However, this volume has not fostered industry development and made the country a liquidity gateway for global traders. This structure is not conducive to sustainable growth. South Korea urgently needs to make progress in business and technology to strengthen the Web3 ecosystem.
Source: Arthur Hayes
Due to insufficient local innovation and regulatory uncertainty, South Korea has been marginalized in the global Web3 development. This over-reliance on transaction volume rather than ecosystem building has led to a “Korea discount” in the international market.
In 2025, with the new government taking office, major changes are expected to occur in the global industry. South Korea is at a critical crossroads in these changes. Positive moves include allowing cryptocurrency operators to open corporate accounts, developing stablecoin regulations, and advancing cryptocurrency legislation. However, these efforts are only scratching the surface.
To make progress, South Korea must address risks, analyze global policy shifts, and develop a regulatory framework tailored to domestic conditions. South Korea must shift from a focus solely on transaction volume to building a sustainable innovation hub characterized by commercial excellence and technological leadership.
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