Special Report on the South Korean crypto market: Digital Subcontinent under the Kimchi Premium

As the global crypto market's heat tends to stabilize, South Korea continues to showcase an "alternative boom" with active trading and rising enthusiasm.

According to the "Annual Payment Settlement Report" released by the Bank of Korea on April 21, the total market value of the South Korean market is expected to exceed 1,000 trillion won (approximately $74.8 billion) by the end of 2024, with the five major domestic exchanges managing a total of $73 billion in assets; the average daily trading volume in December surged from $2.38 billion in October to $10.7 billion, surpassing the two major South Korean stock exchanges in just two months. The annual revenue of the South Korean crypto market is projected to grow from $264.3 million in 2024 to $635.4 million in 2030, with a compound annual growth rate of 16.1%. As of April 2025, it has been confirmed that 25 million people have opened accounts on virtual asset exchanges to invest in cryptocurrencies. Approximately half of South Korea's 51 million population has invested in the crypto market. Even more striking is the unique "Kimchi Premium" phenomenon in the South Korean crypto market, which refers to the significantly higher prices of cryptocurrencies (such as Bitcoin, Ethereum, etc.) on South Korean exchanges compared to other major exchanges globally. In March 2024, this premium reached 8.5%, peaking at 10% in November, well above the global average, reflecting the extremely high enthusiasm of local investors and the arbitrage demand under capital controls.

The massive flow of capital, a broad user base, and unique market price differential effects have collectively shaped the high activity and extraordinary popularity of the Korean crypto market, which stands out in the global crypto landscape like a "golden land" of the digital age. Why has the Korean crypto market surged so rapidly? We will analyze the deep logic behind this digital hot land from three dimensions—driving factors, current situation, and future opportunities: How do the political and economic structures create strong demand for risk aversion and speculation? How has the local ecosystem evolved from Kimchi Premium to a daily trading volume of over 10 billion USD, shaping a globally leading trading vitality? Looking to the future, what tracks and innovations will continue to push the Korean market to lead? Next, let us delve into this phenomenon of prosperity together.

2. Analysis of the Reasons for the Hot Korean Crypto Market

2.1 Economic Reasons

Investment channels are restricted

In South Korea, traditional investment channels are relatively limited. Under the consumer choice theory framework, individuals, when faced with limited resource allocation, will weigh the utility between different asset classes to maximize expected returns.

When traditional investment products such as real estate and stocks face the realities of high prices, declining returns, poor liquidity, and high entry barriers, investors naturally tend to seek alternative assets with higher marginal utility.

In South Korea, traditional investment channels are facing structural challenges. For example, in real estate and stocks:

• Real Estate:

In 2023, South Korea's economic growth rate was only 1.4%. Although it is expected to rise to 2% in 2024, consumption and investment confidence remain weak.

Against this backdrop, housing prices remain high, showing structural contradictions. Since 2010, the capital region has increased by 47.1%, and the five major metropolitan areas have seen a rise of 76.5%. In 2024, the transaction volume in the capital region decreased by 7.5% year-on-year, with Seoul experiencing a continuous decline for three months from August to October (20.1%, 34.9%, 19.2%).

Faced with the "three highs and one low" situation of high housing prices, high loan rates, high interest rates, and low transaction volume, traditional real estate no longer possesses the widely adaptable investment attributes, and market participation enthusiasm has significantly cooled. Young people and those with low to medium incomes are restricted in purchasing property, prompting them to turn to emerging investment channels such as crypto assets, which offer high volatility and high return expectations.

• Stock

In terms of the stock market, the KOSPI (Korea Composite Stock Price Index) fell by 8.03% in 2024, far below the Shanghai Composite Index's +12.68% and the Nikkei 225's +17.06% during the same period. At the same time, the S&P 500 rose, causing the return gap between the two markets and the Korean market to reach 32.3%, the highest since 2000. While global stock markets are generally recovering, the Korean market is showing a "lonely downturn (고립된 약세)" situation. Investor confidence has been significantly undermined.

Against the backdrop of continued sluggish performance in the traditional stock market in South Korea and weak earnings expectations, some South Korean investors are beginning to turn their attention to the more volatile and higher return potential of the crypto asset space.

low interest rates and loose monetary environment

The long-term accommodative monetary policy and low interest rate environment have prompted South Korean investors to accelerate their shift towards high-yield assets. Since the pandemic, the Bank of Korea's benchmark interest rate has remained at 3.5% for a long time, significantly lower than the Federal Reserve's rate level of over 5%, resulting in decreased savings attractiveness and real returns that struggle to withstand inflationary pressures.

In this context, the demand for high-volatility, high-return assets has increased. Cryptocurrencies, due to their strong yield potential, low barriers to entry, and high liquidity, have become the preferred investment direction for risk-seeking investors, especially among the younger demographic. Overall, the low interest rate policy has weakened the attractiveness of traditional financial instruments, further driving funds towards crypto assets.

Expectation of Korean Won Depreciation

In recent years, the Korean won has continued to depreciate, with the exchange rate against the US dollar dropping to 1473.75 won in April 2025, the lowest level since 2009. The depreciation of the won, combined with high oil prices and rising supply chain costs, has increased domestic inflationary pressures. Data shows that in March 2025, South Korea's CPI rose by 2.1% year-on-year, with prices for kimchi and coffee increasing by 15.3% and 8.3% respectively, resulting in a decline in residents' actual purchasing power and putting pressure on economic recovery.

Cryptocurrency, as an asset priced in US dollars, globally circulated, and decentralized, has become a new path for investors to hedge against domestic currency depreciation and pursue asset preservation.

2.2 Social Psychological Reasons

According to the theory proposed by economist Samuelson that "Happiness = Utility / Desire", when desire rises rapidly while the acquisition of utility is limited, individual happiness will significantly decrease.

• Long-term social class固化, high competition pressure and economic fluctuations have intensified the wealth anxiety among young people, making "money" the dominant life goal. According to data from the Bank of Korea in 2024, 72.4% of respondents believe that "economic conditions" are the most important determining factor for happiness. At the same time, a report from the Korean Statistical Office in early 2025 indicated that 69.1% of the 20-39 age group listed "financial freedom" as their primary life goal.
• In such a social atmosphere, slogans like "돈이 최고야（Money is the most important）" and "현실이 개차반이야（Reality is terrible）" are popular.
• Under the traditional paths such as employment, savings, and stock market returns failing to meet wealth desires, young people in the crypto market pursue investment options that offer efficiency and break class limitations, which are seen as potential channels for achieving happiness and reversing their fate.

At the same time, around the goal of "financial freedom", the consumption concepts of the young population in South Korea are also undergoing profound changes, further influencing their investment preferences.

According to reports from multiple media outlets, young people in South Korea are exhibiting two typical types of consumer psychology differentiation:

• One is the "YOLO (You Only Live Once)" group, which emphasizes enjoying life in the moment and a high risk tolerance;
• The "YONO (You Only Need One)" group tends to rational consumption and values asset accumulation.

In the YOLO generation, facing real pressures and class anxiety, many young people tend to view the crypto market as a "get-rich-quick opportunity" that surpasses the stock market, breaking traditional wealth paths and achieving upward mobility. In contrast, the YONO generation gradually shifts towards increasing savings and investments due to considerations of asset preservation and hedging against economic uncertainties. According to a 2024 Gen Z consumption trend survey, about 71.7% of young respondents indicated that they would prioritize savings and asset allocation. Crypto assets have become a new investment choice due to their high returns.

Despite differing consumption attitudes, both share a common motivation for investing in high-yield assets. Cryptocurrency precisely meets their mutual psychological pursuit of returns and wealth growth.

2.3 Why is South Korea so prosperous, and not Japan?

2.3.1 Economic Perspective: The Korean Won is relatively weak, necessitating alternative paths.

• Yen: Due to its extremely low interest rates and large foreign exchange reserves, the yen is internationally regarded as a safe-haven currency. Even when the yen's exchange rate fluctuates, its financing advantages remain unchanged, and the market is more willing to hold yen assets to hedge against declines in other markets when faced with geopolitical risks or financial turmoil.
• Korean Won: The market size is small, liquidity is weak, and it fluctuates in the same direction as global risk sentiment. Additionally, its foreign exchange reserve status is relatively weak, with some capital controls, making it difficult to assume the same position as the Japanese Yen.

Therefore, compared to Japanese investors, South Korean investors have a greater lack of long-term trust and security in domestic currency assets, tending to seek non-local currency denominated assets that can circulate globally, and encryption currencies are highly aligned with investor demand.

2.3.2 Economic Perspective: Traditional investment yields are lower, seeking higher returns.

• Real Estate: South Korea's real estate investment accounts for over 50%, significantly higher than Japan's 37%, but the overall actual yield is lower, and there are more restrictions on real estate investment:

• Stock Market: In recent years, the South Korean stock market has been relatively weak compared to Japan. However, this has been particularly evident in 2024:

2.3.3 Policy Perspective: South Korea is open, while Japan is conservative and restrictive

2.3.4 Cultural Perspective: South Korea pursues quick wealth, while Japan focuses on steady accumulation.

• Japan: Places greater emphasis on "small savings lead to large gains" and "prudent financial management". The proverbs "一生懸命働いて、少しずつ貯める" (Work hard all your life, save little by little) and "家宝は寝て待て" (Family treasures should wait for themselves) reflect the Japanese tendency towards long-term accumulation and stable appreciation, emphasizing values of restraint, accumulation, and patience.
• South Korea: Emphasizing "quick success" and "keeping up with trends", the concept of "빨리빨리 (quick quick)" is prevalent in society, where people are more inclined to pursue short-term high returns, eager to achieve quick wealth through stock trading, crypto trading, real estate, and other means.

The prosperity of the crypto market in South Korea is essentially the optimal balance made by investors in terms of macroeconomics, traditional assets, government attitudes, and cultural thinking. Although Japan, as another developed country in East Asia, has a relatively similar environment, it still lags slightly behind South Korea, which stands out in the global crypto market.

2.4 The Inspiration of the Korean Model on the Global crypto market

As the landscape of the crypto market in Asia undergoes subtle changes, South Korea's "middle way" is highlighting its strategic value. Compared to a certain trading platform's recent tightening of regulations on providing services to overseas for local projects, as well as the slow pace of approvals and taxation in Hong Kong and Japan, South Korea's institutional flexibility, cultural fit, and capital environment are forming a new comparative advantage.

The latest policy from a certain financial regulatory authority requires local projects to stop providing token services to overseas markets by the end of June and cancels the transitional support, breaking its previous "friendly" regulatory image. This sudden policy shift has led many crypto companies to reassess their deployment in the Asian market, turning their attention to countries with more flexible regulations and greater room for implementation. Although Hong Kong is also actively opening up, due to the complexity of regulatory layers and a cautious pace, it is still difficult to accommodate a large number of project transfers in the short term.

Against this backdrop, South Korea is becoming a strong candidate in the next round of the crypto hub competition in Asia, leveraging its local resource integration capabilities, technological implementation efficiency, and social cultural stickiness. For the global market, the key insight from the Korean model is that regulation can be encouraging guidance rather than complete relaxation; user education and cultural adaptation are the underlying logic of all growth; infrastructural sovereignty and international collaboration are not in conflict, but rather dual aspects of future development.