SEOUL — South Korea’s burgeoning virtual asset market is facing a structural crisis as strict regulatory limits and looming tax disparities push domestic investors toward global platforms, industry experts warned at an emergency seminar on Tuesday.

The forum, themed "Coin Exodus: No Longer Acceptable to Ignore," was held at the National Assembly Library, bringing together lawmakers, researchers, and industry leaders to address the mass migration of domestic digital asset capital.

The Scale of the Exodus

According to Tiger Research, which tracks roughly 5 million crypto wallets globally—including an estimated 170,000 belonging to South Korean nationals—investors are increasingly bypassing local platforms.

During the session, Tiger Research CEO Kim Gyu-jin highlighted a case where a single South Korean investor transferred roughly 1.2 billion KRW ($880,000 USD) out of a domestic exchange. These funds flowed into decentralized finance (DeFi) platforms for Ethereum staking, perpetual futures trading, crypto payment cards, and international prediction markets.

While overall digital asset movement from South Korea to overseas markets dipped slightly this year to roughly 169 trillion KRW (following a cumulative estimated 700 trillion KRW over the past five years), experts note that the ratio of outbound capital relative to shrinking domestic trading volumes is actually growing. Consequently, offshore exchanges like Binance, Bybit, and decentralized platforms like Hyperliquid are reaping billions in trading fees—estimated between 2 trillion and 3 trillion KRW this year alone.

Furthermore, offshore crypto-linked payment cards—utilizing Visa and Mastercard rails to let users spend overseas-topped crypto assets domestically—have accumulated nearly 38,000 app downloads and billions of KRW in monthly volume, capturing everyday payment demand alongside investment capital.

The Tax Loophole Dilemma

Industry representatives cautioned that South Korea’s impending tax policies could worsen the flight of capital. Under current plans, domestic spot trading gains face taxation, while profits generated from overseas crypto derivatives remain in a legal gray area.

Kim Jae-jin, Executive Vice President of the Digital Asset Exchange Association (DAXA), noted that derivatives—which settle price differentials without the direct transfer of underlying assets—do not cleanly fit into existing legal definitions for taxable transfers or rentals.

Ahn Sung-hee, a professor at Catholic University, warned that if regulatory authorities cannot effectively track decentralized wallets and foreign exchanges, the tax burden will unfairly concentrate solely on users remaining on domestic centralized platforms.

Calls for Institutional Reform

To stem the tide, experts urge Seoul to embrace structural reforms rather than attempting to enforce futile blocks on on-chain activity. Key recommendations include:

*Opening Corporate Accounts: Implementing a phased roadmap to allow corporate participation in the local crypto market. Estimates suggest that if 5% of private assets and 2% of public pension funds allocate to digital assets, an 82 trillion KRW market could emerge.
*Expanding Product Offerings: Permitting domestic exchanges to offer advanced instruments such as derivatives and stablecoin utilities to compete head-to-head with global platforms.
*Modernizing Tax Frameworks: Aligning local tax policies with global realities to ensure fairness between domestic and foreign exchange users.

In response to the discussions, Moon Kyung-ho, head of the Income Tax Division at the Ministry of Economy and Finance, stated that the government is actively listening to industry feedback and will consult with relevant ministries and parliament to develop reasonable, market-responsive tax and regulatory policies.

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