Author: Zen, PANews
On July 24th last year, the trading volume of South Korea's five major cryptocurrency exchanges (Upbit, Bithumb, Coinone, Korbit, and Gopax) reached 16.919 trillion won, exceeding the KOSPI (Korea Composite Index) of 15.007 trillion won on the same day. However, the two markets subsequently experienced completely different development trajectories.
As KOSPI trading volume surged from the end of last year, and the cryptocurrency market continued to decline, the gap between them widened rapidly.
As KOSPI trading volume surged from the end of last year, and the cryptocurrency market continued to decline, the gap between them widened rapidly.
As of the end of May, KOSPI's daily trading volume was 118.267 trillion won, while the 24-hour trading volume of the five major cryptocurrency exchanges was only 2.713 trillion won, the latter being only 2.03% of the size of the South Korean stock market. Amid the current AI boom, South Korean retail investors seem to have lost interest in cryptocurrency trading; Samsung and SK Hynix are the more favored players. However, unlike retail investors who are withdrawing funds from the secondary cryptocurrency market, institutional investors have not left the industry. Instead, they are betting on exchange equity and compliance licenses. Large South Korean financial groups, securities firms, technology companies, and overseas cryptocurrency institutions have begun a concentrated acquisition of cryptocurrency exchange equity. Compliance becomes a scarce asset, and the competition for exchange equity enters a period of intense competition. In South Korea, where regulations are stringent, the barriers to entry for cryptocurrency exchanges are not low. From the perspectives of licenses, accounts, compliance systems, and future business entry points, cryptocurrency exchanges are actually one of the scarcest infrastructures in South Korea's digital financial system. To truly achieve scale, not only are virtual asset service provider qualifications required, but also anti-money laundering systems and the ability to deposit and withdraw Korean won connected to the bank's real-name account system. If South Korea's digital asset regulatory framework is gradually implemented, the role of compliant exchanges may extend from simple spot trading platforms to important entry points for stablecoin circulation, RWA trading, STO-related services, custody partnerships, and institutional digital asset business. Institutions entering the equity level of exchanges at this time are betting not only on current transaction fees, but also on the potential value of these compliant entry points in the next stage of the digital finance market. The acquisition of Coinone's equity is the most direct example. At the end of May, Korea Investment & Securities and OKX jointly signed an agreement to each acquire nearly 20% of the shares of the South Korean cryptocurrency exchange Coinone, becoming its third-largest shareholder. The acquisition was mainly conducted through a new share issuance, and the existing major shareholders' management rights remained unchanged. The significance of this transaction lies not in Coinone's current trading volume, but in the fact that the combination of a traditional brokerage firm and a global exchange is penetrating the South Korean market. Through this acquisition, HanTo Securities will advance its digital asset business, including token issuance and circulation, attracting corporate clients, and large-scale brokerage. For Coinone, introducing a local securities firm and a global crypto institution can improve its capital structure, enhance business synergy, and potentially lay the foundation for future institutional clients, cross-border liquidity, and new product expansion. However, the battle for control of Dunamu, the operator of Upbit, South Korea's largest crypto exchange, better illustrates the value of a leading entry point than Coinone itself. Recently, major financial and technology institutions such as Hana Bank, Hanwha Investment & Securities, Samsung Securities, and Samsung SDS have successively invested in or increased their holdings in Dunamu. Hana Bank will invest approximately 1.0033 trillion won to acquire a 6.55% stake in Dunamu, while Hanwha Investment & Securities plans to increase its stake from 5.94% to 9.84%. Samsung Securities, Samsung SDS, and Samsung Card will collectively acquire a 4% stake in Dunamu. Behind these flurry of transactions, Upbit is no longer just South Korea's largest cryptocurrency exchange, but has also become an important entry point for traditional financial institutions into the digital asset market. Beyond these leading players, Flybit demonstrates that smaller exchanges also possess licensing and compliance value. WeHub, the holding company of Busan digital asset exchange Bdan's largest shareholder, is acquiring shares in Flybit's operator. Upon completion of the transaction, WeHub will hold 40%, WeHub's major shareholder Yang Jae-suk will hold 25%, and Flybit's representative Kim Seok-jin will hold 15%. While Flybit previously lacked a verified Korean won account, this transaction allows Bdan to expand from tokenized trading of physical assets like gold and silver to stablecoin and cryptocurrency trading. Betting on the Next Generation of Digital Finance From the above three equity acquisition cases, it can be seen that institutional buying of South Korean cryptocurrency exchanges should not be interpreted as institutions being bullish on a short-term market trend, but rather as an early positioning for the next generation of digital financial infrastructure. Specifically, three main lines are currently emerging. First is the South Korean won stablecoin. Discussions surrounding stablecoin regulations in South Korea are ongoing, but key disagreements remain unresolved. Discussions on South Korea's Basic Law on Digital Assets were originally planned with high hopes, but disagreements persist regarding the issuer of won stablecoins, reserve accumulation methods, redemption obligations, and restrictions on major shareholders' holdings in exchanges. The relevant legislation has not yet entered substantive review. Once stablecoins are institutionalized, the importance of exchanges will change. In the past, exchanges primarily served as venues for retail investors to buy and sell coins; in the future, exchanges may become crucial nodes for stablecoin issuance, exchange, custody, circulation, and compliance monitoring. Especially in a market like South Korea, where the banking system is deeply intertwined with exchanges, whoever controls the entry and exit points for won funds will be closer to the core liquidity of stablecoins and on-chain payments. The second is RWA and tokenized securities. South Korea has been discussing the tokenization of physical assets, security tokens, and blockchain financial infrastructure in recent years. The combination of Bdan and Flybit is a microcosm of this direction: on one end is the tokenization trading of physical assets such as gold and silver, and on the other end are existing cryptocurrency exchange licenses and systems. For traditional financial institutions, exchange equity may also become a prerequisite for participating in the issuance, distribution, clearing, and secondary trading of tokenized securities in the future. The third is digital asset services for enterprises and institutions. South Korean domestic exchanges have primarily served individual investors in the past, but if regulations gradually loosen restrictions on corporate accounts, institutional custody, compliant trading, and digital asset investment products, the customer structure of exchanges may shift from being dominated by retail investors to having institutional participation. For exchanges, this means expanding their revenue structure from single transaction fees to include custody, settlement, market making, asset issuance, investment products, and technical services. For traditional financial institutions, holding shares in an exchange in advance is equivalent to securing a foothold in the future compliant digital asset market. However, the influx of institutional investors does not necessarily mean that the South Korean crypto industry will immediately re-enter an upward cycle. The South Korean market's investment preferences over the past year have clearly shifted from the retail-driven crypto trading boom to the stock market becoming the primary battleground for capital and sentiment-based trading. Due to restrictions on corporate and institutional participation, foreign investment, real-name account systems, and regulatory constraints, South Korean exchanges still rely more heavily on trading by domestic individual investors. Their business flexibility cannot be compared to overseas exchanges, which diversify their revenue streams through institutional business, custody, stablecoins, derivatives, payments, and asset management. In terms of revenue structure, South Korean cryptocurrency exchanges are highly dependent on transaction fees. Dunamu's transaction fee revenue in the first quarter was 228.7 billion won, accounting for 97.49% of its total revenue; Bithumb's transaction fee revenue accounted for nearly 99.99%. This makes South Korean exchanges more severely impacted than overseas platforms during this crypto market "winter." Dunamu's consolidated revenue in the first quarter of this year was 234.6 billion won, a 54.6% decrease compared to the same period last year; Bithumb's revenue fell from 194.7 billion won to 82.5 billion won, a 57.6% decrease. Besides the "vulnerability" of business operations, there is also uncertainty regarding South Korean regulation. The Basic Law on Digital Assets is still under debate, the rules regarding stablecoin issuers and reserve requirements are not yet fully clear, and restrictions on major shareholders' holdings in exchanges may affect existing equity structures. Whether South Korean market interest in crypto assets can recover depends on global market conditions, regulatory implementation, product innovation, and changes in the risk appetite of domestic funds. Regardless, the exodus of retail investors has put pressure on the short-term performance of exchanges, and to some extent, it has also created a window for the reorganization of equity prices, shareholder structures, and strategic resources. Therefore, this round of "bottom-fishing" by South Korean institutions is not simply about the bottom of cryptocurrency prices, but rather the cyclical bottom of exchanges as digital financial infrastructure. When the market is at its quietest, retail investors see a shift in narrative and the disappearance of the wealth effect. Institutions, however, see the potential entry point for the next wave of stablecoins, RWA, tokenized securities, and institutional digital asset services. The battle for control of South Korean cryptocurrency exchanges began precisely because of this contrast.
Kikyo
Catherine
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