South Korea has announced a postponement of its planned 20 percent tax on crypto asset profits, following a surge in capital outflows from the country. Major political factions reached a consensus to put the new tax regime on hold until 2027, in a bid to stem the flight of domestic funds to overseas platforms. The move comes as local investors increasingly favor foreign exchanges, drawn by greater opportunities and fewer restrictions abroad.
Record-Breaking Crypto Capital Outflows
The country’s Financial Services Commission (FSC) revealed that a staggering $60 billion in capital left South Korea in just the second half of 2025. For the full year, crypto-related outflows soared to $110 billion. Much of this exodus went to foreign exchanges offering leveraged and derivative products unavailable domestically.
Reports indicate a surging interest in global platforms like Binance, which boast high trading volumes and a wide selection of financial products. According to an analysis by CoinGecko and Tiger Research, 57 percent of all South Korean crypto assets moved abroad in 2025 ended up at Binance alone. Korean traders now account for roughly 13 percent of Binance’s total futures trading volume.
South Korea’s strict rules permitting only spot trading on local exchanges have pushed both individual and institutional investors to look overseas for greater flexibility. Domestic giants such as Upbit and Bithumb are bound by regulations that prevent them from offering margin trading or derivatives, intensifying the migration to international venues.
Shifting Regulations and Political Stance
The government’s decision to delay implementing the crypto tax follows mounting pressure from economic imbalances. Both the ruling People Power Party and the main opposition Democratic Party agreed to the deferral, citing a severe contraction in market liquidity and concerns that the financial sector’s overall size was coming under threat.
The opposition, which previously pushed for immediate taxation, ultimately backed down amid the economic slowdown and escalating capital outflows. Today’s investors aren’t just cashing out profits; they’re actively moving their holdings to foreign platforms to access risk hedging, leverage, and advanced trading products.
By the end of the year, local crypto exchanges saw deposit growth jump by 31 percent across 18 platforms, yet profits plummeted. Despite the increase in trading activity, the overall operating profit for these exchanges fell by 38 percent in the same timeframe.
The FSC’s report attributed the sharp rise in capital flight to arbitrage and similar strategies, noting that high-volume trades shifting abroad are eroding local platform revenues.
Regulators warn that unless rapid solutions are devised to address liquidity demands, outbound capital flows may persist. Meanwhile, the industry has intensified its search for new markets and innovative products to regain competitive ground as domestic players grapple with regulatory and profitability challenges.
