This Week In Crypto Asia: South Korea’s Crypto Exchange Market Shrinks By 26%

South Korea’s cryptocurrency exchange market is undergoing significant contraction, with the number of registered crypto trading firms dropping by over 26% in the past year. 

As of February 2025, only 31 registered crypto exchanges remain operational in South Korea. This is a sharp fall from 42 exchanges in early 2024. 

On 7 February 2025, the local media reports said that “the number of domestic virtual asset service providers (VASPs) has decreased compared to last year.”

The decline, as highlighted in a recent report by the Financial Intelligence Unit (FIU), shows the challenges posed by stringent regulatory requirements.

Furthermore, lack of regulatory clarity have forced smaller exchanges out of the market.

Crypto Tax Comparison: U.S., India, and South Korea 💰

🚀 Trump Administration Prioritizing Bitcoin Reserves
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GDAC, ProBit, Huobi Korea, Bitrade Have Shut Down 

“Coin Market exchanges have been going out of business one after another due to management difficulties since last year,” the report said, “but they officially remained on the list of business operators as their licenses were maintained for a certain period of time.”

Notable closures include GDAC, ProBit, Huobi Korea, and Bitrade.

Most of these delisted companies were “token-only” platforms that lacked fiat currency trading options, such as the Korean won or US dollar. Without real-name bank accounts—a regulatory requirement for fiat transactions—these platforms struggled to attract users and maintain their operations.

The FIU report revealed that over 90% of these token-only exchanges faced “complete capital erosion” last year. This led to widespread closures. Exchanges like Qubit and Coinbit are among those that shut down. This was due to financial insolvency and failure to renew their registrations.

South Korea’s regulatory framework for cryptocurrencies has been evolving rapidly over the past few years. While aimed at enhancing investor protection and market integrity, these regulations have also created significant entry barriers for smaller players.

Recently, South Korea’s largest cryptocurrency exchange, Upbit, was under intense regulatory scrutiny. After being accused of violating over 700,000 Know Your Customer (KYC) and Anti-Money Laundering (AML) obligations, Upbit is facing suspension.

Explore: South Korea To Launch Platform To Seize Digital Assets From Tax Evaders

South Korea’s New Platform Designed To Seize Digital Assets From Tax Evaders

According to South Korean local media reports dated 3 February 2025, Gwacheon city announced the use of IT solutions to seize and liquidate crypto assets from tax evaders.

The regulators aim to use this platform to identify crypto wallets belonging to tax evaders in the city. Authorities have so far identified 361 high income citizens who have not paid tax on their crypto gains

Authorities think that the identified netizens are hiding their wealth in crypto assets to avoid paying heavy taxes. With the average amount being 18.8 billion Won, the non-paid taxes have been calculated to be over 3 million won.

There is still an agreement to be reached in South Korea regarding crypto taxes.

Explore: South Korea’s Upbit Faces Regulatory Scrutiny After KYC, AML Violations