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

1. Introduction

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, it is expected that by the end of 2024, the total market value of the South Korean market will exceed 100 trillion won (approximately $74.8 billion), with the five major local 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 South Korea's crypto market is expected to grow from $264.3 million in 2024 to $635.4 million in 2030, with an average annual compound growth rate of 16.1%. As of April 2025, it has been confirmed that 25 million people have opened accounts at virtual asset exchanges to invest in encryption. About half of South Korea's 51 million population has invested in the crypto market. Even more striking is the unique "Kimchi Premium" phenomenon in South Korea, which refers to the significantly higher prices of cryptocurrencies (such as Bitcoin, Ethereum, etc.) on South Korean exchanges compared to other major exchanges worldwide. In March 2024, the premium reached 8.5%, peaking at 10% in November, far exceeding the global average, reflecting the high enthusiasm of local investors and the arbitrage demand under capital controls.

The massive flow of funds, a broad user base, and unique market price differential effects have collectively shaped the high activity and extraordinary enthusiasm of the Korean crypto market, which stands as a "golden land" of the digital age in the global crypto landscape. What exactly has driven the rapid explosion of the Korean crypto market? We will analyze the deep logic behind this digital hotbed from three dimensions: the driving factors, the current situation, and future opportunities: How do the political and economic structures generate strong demand for hedging and speculation? How has the local ecosystem evolved from the "Kimchi Premium" to an average daily transaction volume of 10 billion USD, creating a globally leading trading vitality? Looking to the future, what tracks and innovations will continue to propel 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 among different asset classes to maximize expected returns.

When traditional investment products such as real estate and stocks face 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 difficulties. For example, in real estate and stocks:

Real Estate:

In 2023, South Korea's economic growth rate is only 1.4%. Although it is expected to rebound to 2% in 2024, consumer and investment confidence remains weak.

Against this backdrop, housing prices remain high, revealing structural contradictions. Since 2010, the metropolitan area has increased by 47.1%, with the five major metropolitan cities seeing an increase of 76.5%. In 2024, the transaction volume in the metropolitan area decreased by 7.5% year-on-year, while Seoul experienced a decline for three consecutive 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 characteristics, and market participation enthusiasm has clearly cooled. Young people and low- to middle-income earners are limited in their ability to purchase homes, 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 lower than 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 a gap of 32.3% in returns between the two markets and the Korean market, the highest since 2000. As the global stock markets generally warmed up, the Korean market showed a "lonely downturn (고립된 약세)" situation. Investor confidence has been significantly undermined.

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

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%, significantly lower than the Federal Reserve's rate of over 5%, leading to a decline in the attractiveness of savings and making it difficult for real returns to withstand inflationary pressures.

Against this backdrop, the demand for high-volatility, high-return assets has intensified. Cryptocurrencies, with their strong potential for returns, low barriers to entry, and high liquidity, have become the preferred investment direction for risk-tolerant investors, especially among the younger population. Overall, the low interest rate policy has weakened the attractiveness of traditional financial instruments, further driving funds toward crypto assets.

Expected depreciation of the Korean Won

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 the South Korean CPI rose by 2.1% year-on-year in March 2025, with the prices of kimchi and coffee rising by 15.3% and 8.3%, respectively, damaging residents' real purchasing power and putting pressure on economic recovery.

Cryptocurrency, as a USD-denominated, globally circulating, decentralized asset, 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, "happiness = utility/desire," when desires rise rapidly while utility acquisition is limited, individual happiness will significantly decrease.

Long-term social class solidification, high competitive pressure, and economic fluctuations are driving the wealth anxiety of 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 situation" is the primary determinant of happiness. At the same time, a report from the Korean Statistical Office at the beginning of 2025 pointed out that 69.1% of the 20-39 age group listed "financial freedom" as their top life goal.

In such a social sentiment, slogans like "돈이 최고야（Money is the most important）" and "현실이 개차반이야（Reality is too bad）" are popular.

In the face of traditional paths such as employment, savings, and stock market returns failing to meet the desire for wealth, young people in the crypto market seek investment options that offer efficiency and break class limitations, which are seen as potential avenues for achieving happiness and reversing their fate.

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

According to reports from media such as "Asian Economy", young people in South Korea are showing two typical types of consumer psychological differentiation:

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

In the YOLO generation, faced with real-world 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 through traditional wealth paths to achieve class ascension. On the other hand, the YONO generation, considering asset preservation and hedging against economic uncertainties, is gradually shifting towards increasing savings and investments. According to a 2024 Generation 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 converge on the investment motivation for high-yield assets, and cryptocurrency perfectly satisfies their shared psychological pursuit of returns and wealth growth.

2.3 Why is South Korea so prosperous, instead of Japan?

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

• Japanese 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 in the face of geopolitical risks or financial turmoil to hedge against declines in other markets.
• 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 weak, with some capital controls, making it difficult to assume the same status as the Japanese Yen.

Therefore, compared to Japanese investors, South Korean investors lack long-term trust and security in domestic currency assets, tending to seek non-domestic currency-denominated assets that can circulate globally, and cryptocurrency highly aligns with investor needs.

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

• Real Estate: Investment in South Korea's real estate accounts for over 50%, far 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 is particularly evident in 2024.

2.3.3 Policy Perspective: South Korea's Attitude is Open, Japan's 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 "saving little by little" and "prudent financial management". The proverbs "一生懸命働いて、少しずつ貯める" (Work hard for a lifetime and save little by little) and "家宝は寝て待て" (Family treasures wait for themselves) reflect the Japanese tendency towards long-term accumulation and stable value increase, emphasizing the values of restraint, accumulation, and patience.
• South Korea: Emphasizes "quick success" and "keeping up with trends". The concept of "빨리빨리 (quickly)" is popular in society, and 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 that investors strike concerning macroeconomic factors, traditional assets, government attitudes, and cultural mindset. While Japan, as another developed country in East Asia, has a relatively similar environment, it still lags slightly behind South Korea's standout position in the global crypto market.

2.4 The Inspiration of the Korean Model for the Global Crypto Market

As the landscape of the crypto market in Asia quietly changes, the "middle way" presented by South Korea is highlighting its strategic value. Compared to Singapore's recent tightening of regulations on local projects providing services overseas, as well as the slow pace of approval and taxation in Hong Kong and Japan, South Korea's institutional flexibility, cultural alignment, and capital environment are forming a new comparative advantage.

The latest policy from a 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 "foreign-friendly" regulatory image. This sudden policy shift has led many crypto enterprises to reassess their deployment in the Asian market, turning their attention to countries with more flexible regulations and greater opportunities for implementation. Although Hong Kong is also actively opening up, due to the complex layered regulations and cautious pace, it is still difficult to accommodate a large number of project transfers in the short term.

In this context, 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