South Korean crypto market to grow to $45.9 billion by 2021 despite strict regulations

South Korea’s crypto market grew to 55 trillion won ($45.9 billion) by the end of 2021, according to a new study from the country’s financial regulator, the Financial Service Commission.

South Korea is considered one of the strictest crypto markets in terms of implementing regulatory policies and regularly made headlines in 2021 due to its new travel rule and Know Your Company requirements. However, the Korean crypto market has soared to new heights despite regulatory oversight in 2021.

The FSC analyzed transaction data from the 24 licensed crypto exchanges and revealed that daily transactions on Korean crypto exchanges reached 11.3 trillion won ($9.4 billion). The combined operating profit of 24 companies was 3.37 trillion won ($2.8 billion). In total, nine crypto exchanges have reported net losses in the past year.

The crypto trading market has been dominated by national fiat Koreans who accounted for 95% of the total crypto transactions mainly coming from Upbit, Bithumb, Coinone and Korbit.

Winning’s dominance in the Korean crypto market is attributed to a new crypto licensing regulation issued in 2021 that required crypto exchanges to open real merchant bank accounts in conjunction with a certified bank. The specific regulations forced nearly 200 small and medium-sized crypto exchanges out of business as banks refused to cooperate or offer any of their services.

Related: Korea’s Crypto Market Is One Of The Strongest — And The Strangest — In The World

The FSC report published by The Korea Herald suggests that there are a total of 15.3 million registered users of crypto exchanges, of whom only 5.58 million participated in trading in 2021. Of these 5.58 million crypto users, nearly 3.1 million users have crypto assets worth less than 1 million won ($850), while 15% of traders own virtual assets worth more than 10 million won ($8,500).

South Korea’s crypto licensing rules have wiped the majority of medium and small exchanges out of the country, and those that survived have had to adhere to strict privacy laws, ban transactions from the private wallets and mark transactions above a certain amount. Another proposal was released in November for token issuers aimed at recovering illegally obtained funds, dishing out criminal penalties and protecting investors from future crimes.

Another proposal was released in November for token issuers aimed at recovering illegally obtained funds, dishing out criminal penalties and protecting investors from future crimes.

By the last quarter of 2021, the focus of Korean regulators shifted to crypto taxation, with a proposal to impose a 20% tax on crypto profits. However, in the absence of clear regulation for the market, fiscal policy was postponed for another year.

The country has also shifted its focus to non-replaceable tokens in the recent past and could become one of the first countries to enact NFT tax rules.

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