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South Korean investors have reduced their exposure to digital currencies by half over the past year, as investors turn to a strong stock market and dollar-denominated stablecoin holdings, which surged nearly tenfold amid a strong dollar.
Data from the Bank of Korea (BoK) showed that domestic digital asset holdings plunged from KRW 121.8 trillion ($93.7 billion) in early 2025 to KRW 60.6 trillion ($46.6 billion) at the end of February, according to a report on May 6 from local outlet Korea Bizwire.
The figures reportedly reflect assets held by investors with accounts at the country’s five top exchanges: Upbit, Bithumb,
Korbit, Coinone, and Gopax.
Similarly, trading activity dropped from an average daily turnover of KRW 17.1 trillion (~$11.6 billion) by December 2024 to around KRW 4.5 trillion (~$3.33 billion) by the end of February of this year, while funds parked on exchanges—a signifier of investment intention—also declined, with won-denominated deposits dropping to KRW 7.8 trillion (~$6.0 billion) from KRW 10.7 trillion (~$8.2 billion) at the end of last year.
The downturn comes amid a broader slump in the digital asset space, with BTC—often a bellwether for the crypto market—falling from an all-time high of over $125,000 in October 2025 to around $82,000 as of this week. This is deepened by increased market uncertainty amid the ongoing conflicts in Ukraine and Iran, with the latter particularly affecting global oil prices.
Yet, despite the digital asset downturn, holdings of stablecoins in South Korea have expanded dramatically, rising almost ten-fold from KRW 88.5 billion (~$68 million) in mid-2024 to a peak of KRW 872.3 billion (~$671 million) towards the end of last year, and remaining around KRW 607.1 billion (~$467 million) in February.
According to experts, cited by Korea Bizwire, this seeming flight to dollar-backed assets can be attributed to three primary factors: first, the strong performance of both domestic and international equity markets, with an increased momentum in major global stock markets towards the start of 2025 drawing investment into equity and away from the more volatile digital asset market; second, exchange-rate movements, with fluctuations in the won-dollar rate likely influencing demand for stablecoins (in January 2023 the won was trading at 1224 to a dollar, by march this year it has declined to 1511 to a dollar); and thirdly, the broader decline in digital asset valuations, which has directly translated into lower total holdings.
In light of this shift, it’s perhaps unsurprising that there has been an increased focus on stablecoin regulation in South Korea in recent months, with the government proposing to reclassify dollar-backed stablecoins as foreign exchange instruments.
Stablecoin reclassification
In April, the Seoul Economic Daily reported that it had obtained a draft of the long-awaited “Digital Asset Basic Act,” produced by South Korea’s ruling Democratic Party’s Digital Asset Task Force.
Based on the draft, South Korean lawmakers appear to be heading down the route of integrating certain digital assets, namely stablecoins and tokenized RWAs, into existing financial law, rather than bespoke regimes.
According to the Seoul Economic Daily report, the draft bill includes provisions to classify stablecoins used in cross-border transactions as means of payment under the country’s foreign exchange regulations, the Foreign Exchange Transactions Act, rather than the Act on the Protection of Virtual Asset Users.
This means that businesses handling stablecoins would be subject to the supervision of foreign exchange authorities, without requiring separate registration.
Obligations would shift to issuer- and system-level control, including issuers potentially needing central bank or financial regulator authorization, reserve requirements, mandatory backing with high-quality liquid assets, prudential rules similar to payment institutions or banks, legal obligation to redeem at par, and cross-border controls, such as reporting or approvals for international transfers.
With South Koreans increasingly moving away from other digital assets towards stablecoins, it seems likely the government will seek to accelerate the passage of the Digital Asset Basic Act and impose increased controls on non-won-denominated stablecoins.
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