Key Takeaways:
The value of cryptocurrency held by South Korean investors has been cut in half to $41.4 billion in the past year as a domestic stock market boom pulls capital away from digital assets.
The market value fell from 121.8 trillion won ($83.3 billion) in January 2025 to 60.6 trillion won ($41.4 billion) by the end of February 2026, according to data the Bank of Korea submitted to Representative Cha Gyu-geun of the Rebuilding Korea Party.
Daily trading volumes across the country’s five major exchanges, including Upbit and Bithumb, collapsed to $3 billion by February from a high of $11.6 billion in December 2024. In contrast, the iShares MSCI South Korea ETF (EWY) has surged 87% year-to-date in 2026, significantly outpacing even the hottest US semiconductor benchmarks.
The capital flight comes ahead of a planned regulatory tightening, with a 22% tax on crypto gains set for 2027 and stricter anti-money laundering rules slated for August, threatening to further cool one of the world's most active crypto markets.
The rotation out of crypto appears to be flowing directly into South Korea's equity market, which has become one of the world's top performers. The EWY ETF delivered a 95% total return in 2025 and has continued its powerful rally this year, driven by a global AI-related chip boom that has disproportionately benefited Korean manufacturers.
The top two holdings in the EWY ETF account for 45% of the fund, concentrated in memory-chip stocks tied to AI infrastructure demand. The performance gap is stark: while Korean crypto holdings were halved, the EWY has climbed 87% through May 6, 2026, well ahead of the 68% gain for the iShares Semiconductor ETF (SOXX). This suggests, as one analyst put it, that "the chip boom isn’t a Wall Street story" alone, but a global phenomenon with a clear epicenter in Seoul.
Adding to the pressure on the crypto market is a wave of new regulation. In August, financial authorities plan to implement revised anti-money laundering rules that would require crypto transactions above 10 million won involving overseas exchanges or private wallets to be automatically flagged as suspicious.
The local industry body, DAXA, has pushed back, arguing the rule could increase suspicious transaction reports by 85 times to over 5.4 million annually, overwhelming compliance departments and pushing users to offshore platforms. This is compounded by the government's confirmation that a 22% tax on crypto gains will take effect as scheduled on January 1, 2027.
While retail and trading interest wanes, institutional development continues. Samsung SDS recently won a contract to build a blockchain-based securities platform for the Korea Securities Depository, a project set for completion by February 2027, indicating that while speculative fervor has cooled, foundational work on tokenized assets is still moving forward.
This article is for informational purposes only and does not constitute investment advice.
