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

As the heat in the global crypto market tends to stabilize, South Korea continues to showcase an "alternative prosperity" characterized by active trading and soaring enthusiasm. According to the "Annual Payment Settlement Report" released by the Bank of Korea on April 21, it is projected that by the end of 2024, the total market value in South Korea will exceed 100 trillion won (approximately 74.8 billion USD), with the five major domestic exchanges managing a total of 73 billion USD in assets; the daily trading volume in December surged from 2.38 billion USD in October to 10.7 billion USD, surpassing the two major Korean stock exchanges in just two months. The annual revenue of the Korean crypto market is expected to grow from 264.3 million USD in 2024 to 635.4 million USD in 2030, with a compound annual growth rate of 16.1%. By April 2025, it has been confirmed that 25 million people have opened accounts on cryptocurrency exchanges, investing in cryptocurrencies. Approximately half of South Korea's 51 million population has invested in the crypto market. Even more noteworthy is the unique "Kimchi Premium" phenomenon in the Korean crypto market, which refers to the significantly higher prices of cryptocurrencies (such as Bitcoin and Ethereum) on Korean exchanges compared to other major exchanges worldwide. In March 2024, this 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 capital, a broad user base, and unique market price disparity effects have collectively shaped the high activity and extraordinary popularity of the Korean crypto market, which stands out like a "golden land" of the digital age on the global crypto map. What has caused the rapid explosion of the Korean crypto market? We will analyze the underlying logic behind this digital hotbed from three dimensions—driving factors, current landscape, and future opportunities: How do political and economic structures generate strong demand for hedging and speculation? How has the local ecosystem transformed from "Kimchi Premium" to an average daily trading volume of 10 billion USD, creating a leading global trading vitality? Looking ahead, what tracks and innovations will drive the Korean market to continue to lead? Next, let us delve into this phenomenon of prosperity.

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

2.1 Economic Reasons

Investment channels are limited.

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

When traditional investments such as real estate and stocks face high prices, declining returns, poor liquidity, and high entry barriers, investors naturally tend to seek alternative assets that offer 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 rebound to 2% in 2024, consumer and investment confidence remains weak.

Against this backdrop, housing prices remain high, revealing structural contradictions. Since 2010, the capital region has increased by 47.1%, and the five major metropolitan cities 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 three consecutive months of decline 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 volumes, traditional real estate no longer possesses widely adaptable investment attributes, and market participation enthusiasm has significantly cooled. Young people and low-to-middle-income earners are limited in their ability to purchase properties, prompting them to turn to emerging investment channels such as crypto assets, which have high volatility and high return expectations.

Stocks:

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 a 32.3% gap in returns between the two markets and the Korean market, the highest since 2000. While the global stock market is generally warming up, the Korean market is showing a "lonely downturn (고립된 약세)" situation. Investor confidence has been significantly undermined.

Amid the prolonged sluggish performance of the traditional stock market in South Korea and weak earnings expectations, some Korean investors have started to shift their focus to the crypto asset sector, which offers higher volatility and greater return potential.

low interest rates and loose monetary environment

The long-term loose monetary policy and low interest rate environment have encouraged South Korean investors to accelerate their shift towards high-yield assets. Since the pandemic, the Bank of Korea's benchmark interest rate has been maintained at 3.5% for a long time, significantly lower than the Federal Reserve's rate level 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 increased. Cryptocurrencies, due to their strong potential for returns, low barriers to entry, and high liquidity, have become the preferred allocation direction for risk-seeking investors, particularly among the younger demographic. Overall, low interest rate policies have weakened the attractiveness of traditional financial instruments while further driving funds towards crypto assets.

Expected depreciation of the Korean won

In recent years, the Korean won has continued to depreciate, and in April 2025, the exchange rate against the US dollar once fell to 1473.75 won, the lowest level since 2009. The depreciation of the won, combined with high oil prices and rising supply chain costs, has increased domestic inflationary pressure. Data shows that in March 2025, South Korea's CPI rose 2.1% year-on-year, with the prices of kimchi and coffee rising by 15.3% and 8.3% respectively, damaging 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, "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 have intensified young people's anxiety about wealth, making "money" the dominant life goal. According to data from the Bank of Korea in 2024, 72.4% of respondents believe that "economic status" is the most significant determinant of happiness. Meanwhile, a report from the Korean Statistical Office in early 2025 pointed out that 69.1% of people aged 20-39 listed "financial freedom" as their primary life goal.
• In such a social mood, slogans like "돈이 최고야（Money is the most important）" and "현실이 개차반이야（Reality is terrible）" are popular.
• Under the traditional paths like employment, savings, and stock market returns failing to meet the desire for wealth, young people in the crypto market pursue efficient and class-breaking investment options, seen as a potential channel to achieve happiness and reverse their fate.

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

According to reports from media such as "Asia Economy", young people in South Korea are showing two typical consumer psychology divergences:

• The "YOLO (You Only Live Once)" group emphasizes enjoying life in the moment and a high risk preference;
• The "YONO (You Only Need One)" group tends to consume rationally and values asset accumulation.

Among the YOLO generation, facing real-life pressures and class anxiety, many young people tend to see the crypto market as a "get-rich-quick opportunity" that surpasses the stock market, breaking traditional wealth paths and achieving class leaps. In contrast, the YONO generation, considering asset preservation and hedging against economic uncertainties, gradually shifts towards increasing savings and investments. According to a 2024 survey on Generation Z consumption trends, 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 meets their common psychology of pursuing 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 Japanese Yen is internationally regarded as a safe-haven currency. Even when the exchange rate of the Yen fluctuates, its financing advantages remain unchanged. 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.
• South Korean Won: The market size is small, liquidity is weak, and it fluctuates in the same direction as global risk sentiment. Additionally, its position in foreign exchange reserves is relatively weak, with some capital controls, making it difficult to hold the same status as the Japanese Yen.

Therefore, compared to Japanese investors, Korean investors lack long-term trust and security in local currency assets, tending to seek non-local currency denominated assets that can circulate globally, and cryptocurrencies closely align with investor needs.

2.3.2 Economic Perspective: Traditional investment returns are lower, pursuing higher returns

• Real Estate: South Korea's real estate investment accounts for over 50%, significantly higher than Japan's 37%, but the overall actual return rate 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 become especially evident in 2024.

2.3.3 Policy Perspective: South Korea is open, while Japan is conservatively restrictive.

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

• Japan: Places more emphasis on "small savings accumulate to a lot" and "prudent financial management". The proverbs "働いて、少しずつ貯める" (Work hard and save little by little), and "家宝は寝て待て" (Treasure waits for itself), reflect the Japanese tendency towards long-term accumulation and stable appreciation, emphasizing the values of moderation, 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 rapid wealth through stock trading, cryptocurrency trading, and real estate.

The prosperity of the Korean crypto market is essentially the optimal trade-off made by investors in terms of macroeconomics, traditional assets, government attitudes, and cultural thinking. Although Japan, as a developed country in East Asia, has a relatively similar foundation, it still falls slightly short compared to Korea's standout position 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 quietly changes, the "Middle Way" presented by South Korea is highlighting its strategic value. Compared to a certain trading platform's recent tightening of regulations on providing services for local projects overseas, 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.

A recent policy from a regulatory agency 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 prompted many crypto companies to reassess their deployment in the Asian market, turning their attention to countries with more flexible regulations and greater operational space. Although Hong Kong is also actively opening up, the complex regulatory layers and cautious pace make it 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, technology implementation efficiency, and socio-cultural cohesion. For the global market, the key insight from the Korean model is that regulation can be