South Koreans HODLing $73 Billion in Crypto Amid Market Surge
The South Korean crypto market has seen a significant rise, with domestic investors now holding crypto assets valued at an impressive $73.4 billion.
By December 2024, the total market capitalisation of crypto held in domestic wallets surpassed 100 trillion won ($70.5 billion), the first time this milestone has been reached, according to the Bank of Korea’s latest payment settlement report.
This surge represents a significant leap from the 58 trillion won ($41 billion) in October 2024, just weeks before the US elections.
What Sparked the Surge in South Korean Crypto Purchases?
Many experts have pointed out that Trump’s election and his crypto-friendly policies contributed to a notable spike in crypto purchases in South Korea.
The total holdings grew by nearly 987 million won compared to November, and the numbers indicate a sharp rise in interest.
Just two months before, in October 2024, South Koreans were holding approximately 58 trillion won (around $41 billion), demonstrating a rise of more than 2.2 times by December.
The past year's trading volumes on South Korea’s top crypto exchange.
As noted by local media, the boost in crypto investment was largely driven by President Trump’s promises surrounding cryptocurrency and blockchain technology.
The political shift, coupled with Trump’s campaign pledges, appeared to have ignited a wave of optimism in the crypto market, further amplified by the increasing transactional volumes witnessed in the final months of 2024.
Transaction Volumes Skyrocket After Trump’s Election
Transaction volumes saw a similar uptick in the aftermath of Trump’s election.
By the close of 2024, the average daily transaction volume reached a staggering 17.2 trillion won ($12.1 billion), representing a fivefold increase from the levels seen in October.
This surge indicates not only a strong demand for digital assets but also a market driven by political and economic sentiment, reflecting wider shifts in global market trends.
Local Regulations Driving Crypto Growth Despite Challenges
However, the Bank of Korea believes that domestic factors also played a significant role in this crypto boom.
One key factor was the introduction of the Virtual Asset User Protection Act in July 2024.
This law, designed to protect crypto users and combat unfair trading practices, helped to build confidence in the market.
Although the progress of related reforms slowed due to political turmoil, including President Yoon Suk-yeol’s failed attempt to impose martial law in December, lawmakers have expressed their intent to revisit crypto sector reforms after June’s presidential election.
Despite the positive market growth, South Korean companies still face significant regulatory hurdles.
Firms are prohibited from issuing crypto assets or stablecoins in the domestic market, and they remain unable to use their balance sheets to invest in Bitcoin and other cryptocurrencies.
The delay in lifting these restrictions has raised concerns that South Korea’s blockchain industry is falling behind its global counterparts, especially in the US and Japan, which have seen more progressive moves in the crypto space.
Stablecoin Regulations in the Pipeline Amid Concerns
The Bank of Korea has also signalled that stablecoins, which have seen rapid growth globally, could soon face a new regulatory framework in South Korea.
While the BOK acknowledges the potential of stablecoins as a means of payment, the bank has voiced concerns over their impact on financial stability and monetary policy.
In a recent report, the BOK stated,
"Unlike conventional virtual assets, stablecoins have the inherent characteristics of a means of payment."
This raises questions about their widespread use as a replacement for legal tender.
As the debate over stablecoin regulations heats up, the BOK has committed to participating in discussions with the Virtual Asset Committee, a regulatory advisory body focused on shaping crypto policy in South Korea.
The central bank intends to provide input on stablecoin legislation from the perspective of a monetary authority, suggesting that new rules could emerge in the near future.
Catherine
