The Financial Services Commission (FSC), South Korea's primary financial regulator, disclosed that approximately 90 trillion won ($60 billion) in cryptocurrency flowed out from local exchanges to foreign platforms and private wallets during the second half of 2025. This represents a 14% increase compared to the first half of the year, when outflows were 78.9 trillion won ($52.5 billion).
The regulator attributed the capital flight primarily to arbitrage activities, noting that transfers accelerated during periods of heightened global market volatility as traders sought price differences between platforms. Despite the massive outflows, the domestic user base expanded, with active accounts on South Korean exchanges growing 3% to 11.1 million by year-end 2025. User deposits also surged 31% to 8.1 trillion won ($5.4 billion).
However, the financial health of local exchanges deteriorated sharply. The country's 18 operating platforms reported combined operating profits of 380.7 billion won ($253.4 million) in H2 2025—a 38% decline from the previous period. The FSC cited declining prices of major cryptocurrencies toward year-end as a contributing factor. Average daily transaction volume contracted by 15% to 5.4 trillion won ($3.6 billion).
Consequently, the total market capitalization of South Korea's crypto market closed 2025 at 87.2 trillion won (about $58 billion), 8% below its first-half peak. This decline coincided with Bitcoin reaching an all-time high of nearly $126,080 in October 2025.
The report underscores a significant shift in investor behavior, driven by South Korea's stringent regulatory environment. The market is tightly controlled, with strict identity verification, local bank partnership requirements, and reporting standards. While these rules enhance consumer protection, they limit access to products available globally. Local exchanges are largely confined to spot trading, making them less attractive to advanced traders seeking derivatives, perpetual futures, higher-yield staking, and a broader token ecosystem.
This has led to widespread regulatory arbitrage, with capital moving to jurisdictions with more flexible rules. The situation highlights the challenges regulators face in controlling capital movement within decentralized financial (DeFi) systems, where cross-border transactions and private wallets operate beyond domestic oversight. Officials indicated the data will inform future policy, including potential measures to strengthen cross-border monitoring and international regulatory cooperation.
