- South Korea’s crypto market struggles after Bithumb’s massive Bitcoin distribution mistake.
- Trading volumes collapse as regulators tighten oversight across South Korean crypto exchanges.
- New crypto tax plans threaten accelerating capital flight from domestic trading platforms.
South Korea’s digital asset sector is facing mounting pressure after a series of setbacks weakened confidence across the local cryptocurrency market. Trading activity has slowed considerably in recent months, while regulators continue tightening oversight measures targeting exchanges and overseas transfers. At the same time, a costly operational mistake at major exchange Bithumb intensified concerns surrounding risk management within the country’s crypto industry.
According to a report from The Korea Times, the combined value of digital assets held by South Korea’s leading exchanges dropped significantly by late February. Data from the Bank of Korea showed holdings across Upbit, Bithumb, Korbit, Coinone, and Gopax declined to 60.6 trillion won, equivalent to roughly $41.4 billion.
Besides declining asset values, trading volumes also recorded a steep downturn during the same period. Average daily crypto trading volume reportedly fell to nearly 4.5 trillion won as investor participation weakened further. Market observers now believe uncertainty surrounding regulation and taxation continues driving cautious sentiment among retail participants.
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Bithumb Error Intensifies Pressure on South Korean Crypto Exchanges
Investor confidence suffered another blow after Bithumb mistakenly distributed 620,000 Bitcoin during a promotional event earlier this year. The exchange originally intended to distribute rewards worth 620,000 won. However, a clerical error triggered one of the largest mistaken crypto transfers recorded within the local market.
Consequently, some users quickly sold nearly 1,788 Bitcoin before Bithumb managed to reverse the transactions. The unexpected activity temporarily disrupted local Bitcoin pricing and overloaded order books with what traders later described as “ghost coins.” At the time, Bithumb reportedly held only 46,000 actual Bitcoin reserves.
Although Bithumb recovered approximately 99.7% of the misplaced funds, legal disputes still remain active involving unrecovered Bitcoin. Moreover, the incident pushed regulators to demand stronger safeguards against abnormal trading activity. The Bank of Korea subsequently urged exchanges to adopt automated circuit-breaker systems similar to protections used within traditional financial markets.
South Korea’s New Tax Plan Sparks Capital Flight Concerns
Meanwhile, South Korean authorities are preparing stricter anti-money laundering rules targeting crypto transfers exceeding 10 million won to overseas exchanges. Financial institutions will automatically classify such transactions as suspicious and report them directly to the Financial Intelligence Unit.
Additionally, the government plans to introduce a 22% cryptocurrency gains tax beginning next year. Industry participants fear the policy could accelerate capital flight toward offshore platforms beyond local regulatory reach. Authorities currently track transactions efficiently only across five domestic won-based exchanges.
Despite South Korea maintaining its reputation as a major cryptocurrency market, the combination of falling activity, tighter oversight, and operational failures continues to create serious pressure across the sector.
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