Stock trading is more attractive! Total value of crypto holdings in South Korea "halved," 22% tax policy sparks controversy

Author: Ariel, Crypto City South Korea's cryptocurrency market holdings evaporate by half Are stocks more attractive than crypto? The value of cryptocurrency holdings by South Korean investors has shrunk significantly over the past year or so. According to a report by The Chosun Ilbo, data submitted by the Bank of Korea to lawmaker Cha Gyu-geun shows that the total value of cryptocurrency holdings in South Korea plummeted from 121.8 trillion KRW (approximately 83.3 billion USD) at the end of January 2025 to 60.6 trillion KRW (approximately 41.4 billion USD) at the end of February 2026, representing a total decline of 50%. In addition to the shrinkage in asset value, overall market trading activity has also cooled significantly. The total daily trading volume of South Korea's five major cryptocurrency exchanges—Upbit, Bithumb, Korbit, Coinone, and Gopax—plunged from 11.6 billion USD in December 2024 to around 3 billion USD in February 2026. Meanwhile, the KRW deposits held by investors on exchanges for trading purposes also fell from 10.7 trillion KRW at the end of 2024 to 7.8 trillion KRW, highlighting a significant decrease in retail activity and capital demand in the cryptocurrency market. KOSPI rises over 80% annually, strong stock market attracts capital The massive outflow of funds from the South Korean crypto market is due to cryptocurrency prices sliding from their highs, while the domestic stock market has been hitting record highs, benefiting from the AI and semiconductor boom, creating a strong capital-attracting effect. Attracted by the lucrative returns in the stock market, a large number of retail and foreign investors have shifted funds from the cryptocurrency market to the traditional stock market. According to a report by Business Insider, the renowned investment bank Goldman Sachs has listed South Korea as the top market in Asia with the highest investment confidence, giving it an "overweight" rating, while raising the 12-month target price for the South Korean KOSPI index from 8,000 to 9,000 points. The KOSPI index showed an astonishing rally in 2026, recently breaking through the 7,000-point mark. It continued to surge at the opening today (5/11), reaching 7,854 points at the time of writing, with a cumulative increase of over 80% year-to-date. Since the beginning of 2025, the KOSPI index has risen more than threefold. This strong bull market momentum is primarily driven by the massive demand for memory chips in the AI industry, which has significantly benefited companies that dominate the global market, such as Samsung and SK Hynix. Goldman Sachs estimates that driven by strong demand, hardware and semiconductor-related stocks will push South Korean companies to achieve profit growth of up to 300% in 2026. South Korea's crypto tax policy controversy sparks market concerns In addition to the capital crowding-out effect caused by the stock market boom, the strict regulatory and taxation plans implemented by the South Korean government for cryptocurrencies have also brought heavy pressure to the market. According to a report by local media The Elec, South Korean financial regulators have proposed strengthening anti-money laundering (AML) regulations, planning to flag all transfer transactions exceeding 10 million KRW involving overseas exchanges or private wallets as suspicious transactions. This regulation is expected to be implemented as early as August 2026. The Digital Asset Exchange Association (DAXA), representing 27 registered operators, warned that once the regulation is implemented, the number of suspicious transaction reports from the five major exchanges will surge 85 times to 5.4 million, posing a significant challenge to practical compliance operations. On the other hand, the South Korean Ministry of Economy and Finance reiterated that starting January 1, 2027, a 22% tax will be levied on cryptocurrency trading gains exceeding 2.5 million KRW annually, sparking intense controversy over fairness. Since the South Korean government previously abolished the financial investment income tax, allowing stock investors to enjoy tax exemptions, cryptocurrencies are still included in the scope of taxation. Oh Moon-sung, head of the Korea Tax Policy Association, urged the government to resolve infrastructure deficiencies, such as clearly defining valuation standards for airdropped tokens, before implementing taxation. Despite calls from the industry for better technical and institutional safeguards, Moon Kyung-ho, an official from the South Korean Ministry of Economy and Finance, emphasized that the government is actively coordinating implementation details with exchanges, and relevant administrative guidelines are expected to be released within this year to ensure the tax plan proceeds as scheduled. Amidst the outflow