South Korea Crypto Volume Collapses 82.5% on Regulatory Crackdown and Risk-Off Sentiment
South Korea’s five largest crypto exchanges saw daily won‑denominated trading volume plunge about 82–82.5% year‑over‑year between comparable January 2024 and January 2025 snapshots, according to CoinGecko and local reporting. Volume fell from roughly 17.4 trillion won (~$13.1B) on 19 Jan 2024 to about 3.05 trillion won (~$2.3B) on 18 Jan 2025; month‑to‑month comparisons across other windows show a drop from 371.4T won to 77.6T won across five major venues in one comparison. Major exchanges — Upbit, Bithumb, Coinone, Korbit and Gopax — all recorded sharp declines (Upbit ~82% down, Bithumb ~74% down). Analysts attribute the collapse to tighter 2024 regulation (Travel Rule enforcement, enhanced KYC/AML, stricter real‑name banking and fund segregation), post‑bull‑cycle retail consolidation and global macro pressure from higher interest rates that reduced risk appetite. On‑chain metrics indicate active addresses have not fallen as steeply, suggesting a shift from trading to longer‑term custody rather than outright exit. Immediate trader impacts: lower exchange fee revenue, thinner order books, wider spreads and greater slippage on Korean venues, higher volatility risk during low‑liquidity periods, and potential migration to offshore or decentralized platforms. Longer‑term effects could include exchange consolidation, cost‑cutting, and a shift toward custodial, staking or derivatives business lines. Possible recovery drivers cited are improved macro risk appetite, clarity or delay on South Korea’s proposed 20% capital gains tax, approval of spot Bitcoin ETFs, regulatory clarity for new token classes, or renewed retail interest in a price rally. Traders should monitor liquidity metrics (order‑book depth, spreads, on‑chain flows), regulatory announcements from the Financial Services Commission (FSC), spot ETF developments, and any signs of offshore volume migration for short‑term execution risk and longer‑term market‑structure changes.
Bearish
The news is bearish for near‑term price dynamics on major crypto assets traded on Korean venues because an ~82% collapse in won‑denominated volume materially reduces local liquidity. Thinner order books and wider spreads increase execution risk, slippage and short‑term volatility, discouraging large buys that could push prices higher. Regulatory tightening (Travel Rule, KYC/AML, real‑name banking, fund segregation) also raises friction and costs for retail and OTC flows, lowering demand from a previously active retail base. Although on‑chain activity suggests many holders moved to custody rather than exiting — which limits forced sell pressure — the dominant effect is reduced on‑exchange liquidity and fee revenue, which is negative for short‑term upward price pressure. Over the medium to long term the impact could neutralize or turn constructive if catalysts arrive (spot BTC ETF approval, regulatory clarity, or a macro risk‑on shift), but absent such catalysts the immediate market bias is bearish because of constrained liquidity and dampened retail participation.