South Korea’s regulated crypto industry took a sharp hit in the first half of 2026, with operating profits at virtual asset exchanges falling 78%, according to government figures released this week. KoFIU said the downturn tracked lower trading activity, weaker market valuations, and reduced customer deposits denominated in won.
The results underscore how quickly trading-oriented business models can be pressured when overall retail risk appetite shifts elsewhere—particularly as some investors appear to be reallocating capital toward domestic equities.
Key takeaways
- KoFIU data shows operating profits at South Korean crypto exchanges dropped 78% in the first half of 2026.
- Average daily trading volume at domestic exchanges fell 44%, while total market capitalization declined 33% and won-denominated deposits fell 35%.
- Exchange sales decreased 41% over the same period, even as the number of eligible trading accounts rose slightly by 0.4%.
- Government survey coverage included 26 registered virtual asset service providers, spanning exchanges as well as custody and wallet operators.
- Coin holdings by South Korean retail investors reportedly fell 50.2% to 60.6 trillion won over roughly a year, with some coverage linking the shift to stocks.
Government survey points to a broad slowdown
On Thursday, the Korea Financial Intelligence Unit (KoFIU) reported that average daily trading volume at South Korean virtual asset exchanges fell 44% compared with the prior six-month period. The same reporting period saw market capitalization drop by 33% and won-denominated deposits decline 35%, while exchange sales fell 41%.
KoFIU’s survey also captured a slight rise in the number of accounts eligible to trade—up 0.4%—suggesting that the contraction was not primarily driven by access shrinking. Instead, the figures point to reduced engagement intensity: fewer dollars and fewer assets were moving through trading desks, even with a marginal increase in eligible users.
KoFIU said its survey covered activity from Jan. 1 through June 30 and included 26 registered virtual asset service providers: 17 exchange operators and nine custody and wallet providers. That scope matters because it distinguishes between the health of trading venues and the broader plumbing supporting custody and wallet services.
Falling activity coincides with retail capital shifting
The broader decline comes amid signs that South Korean retail participants may be moving attention away from crypto and toward the local stock market. Earlier reporting cited a steep reduction in the value of cryptocurrencies held by South Korean investors.
In May, the value of crypto held by South Korean investors fell 50.2% to 60.6 trillion won (about $41.4 billion) over roughly a year, according to coverage by ChosunBiz, which attributed the change to capital moving toward stocks.
Cointelegraph analysis in July similarly reported that combined average daily volume across several major South Korean exchanges—including Upbit, Bithumb, Coinone, Korbit, and Gopax—had fallen about 89% year over year during comparable seven-day periods. That same analysis noted the KOSPI, South Korea’s benchmark stock index, had more than doubled over the 12 months to July 22, framing the crypto volume contraction against a strengthening equity backdrop.
Why the deposit and valuation drops matter
Trading volume is often the headline metric during market downturns, but KoFIU’s inclusion of market capitalization and won-denominated deposits adds a clearer picture of the economic pressure on exchanges.
A 33% decline in market capitalization indicates that the overall value of assets traded and held within the ecosystem weakened, which typically reduces fee-generating activity even when user bases remain in place. Meanwhile, won-denominated deposits falling 35% suggests less fresh cash was being parked on exchange platforms, which can dampen the ability of customers to initiate and sustain new positions.
In practical terms for exchange operators, those dynamics can translate into lower revenue without necessarily reducing compliance or operational costs at the same pace—helping explain why operating profits were hit more sharply than any single activity metric alone.
Eligible accounts rose slightly—but participation fell harder
KoFIU’s report noted that the number of trading-eligible accounts increased marginally by 0.4% during the covered period. Taken alone, that would imply stability on the access side. However, the much larger declines in volume, sales, and deposits point to a participation problem rather than an onboarding/access problem.
For investors and traders, this distinction can be useful: an increase in accounts does not necessarily translate into liquidity or trading opportunities if market interest wanes. For market structure, it also suggests that platform growth in user eligibility may not be the same as growth in active demand.
KoFIU’s survey covered both exchange operators and custody/wallet providers, reinforcing the view that the sector’s performance was affected broadly, not only at the trading layer. Still, the sharp fall in exchange sales and profits specifically highlights how directly profitability is tied to turnover and asset values.
What to watch next
With KoFIU’s first-half 2026 snapshot showing steep contractions in volume, capitalization, deposits, and profitability, the key question going into the second half is whether trading activity stabilizes as investors reassess where they want to allocate capital. Readers should watch follow-up government data for whether deposits and trading volumes recover alongside— or instead diverge from—movement in South Korea’s equity market.
Be the first to comment