South Korea Crypto Exchange Net Inflows Slump 57% Ahead of January Tax, Overseas Net Outflows Jump 74%

With South Korea set to begin taxing virtual assets in January, capital flowing into domestic exchanges has dropped sharply, fueling concern that investment money may move overseas.

Chosun Biz reported on September 23 that People Power Party lawmaker Park Soo-young analyzed data submitted by South Korea’s five largest crypto exchanges. Net asset inflows at Upbit, Bithumb, Coinone, Korbit and Gopax totaled 2.05 trillion won ($1.49 billion) in the January-August period, down 56.8% from 4.74 trillion won ($3.43 billion) a year earlier.

Won deposits at the exchanges also fell sharply. Balances at the five domestic exchanges dropped 32.3% to 5.2 trillion won ($3.77 billion) in August from 7.69 trillion won ($5.57 billion) in January.

Assets moving to overseas exchanges, by contrast, increased. Net outflows from Korbit and Gopax to foreign exchanges reached 480.2 billion won ($348 million) in the first eight months of this year, up 74.2% from 275.7 billion won ($200 million) in the same period last year.

Dollar-pegged stablecoin activity also expanded. The amount linked to stablecoins on domestic exchanges rose 28.7% to 604.6 billion won ($438 million) in August from 469.9 billion won ($340 million) in January. Over the same period, the stablecoin share of won deposits climbed to 11.6% from 6.1%.

The planned start of crypto taxation in January has been cited as a backdrop to the shift in funds. The government plans to press ahead next year with virtual-asset taxation after delaying it three times. Once the tax takes effect, a 22% rate will apply to annual crypto income above the basic deduction of 2.5 million won ($1,810). Still, it has not been confirmed whether the tax has directly driven fund movements.

As concern grows over tax-driven capital outflows, calls have continued in the National Assembly to scrap the levy or overhaul the system. The People Power Party opposes implementation and has adopted abolition of crypto taxation as its official party position.

At a policy meeting on improving the digital-asset tax system held at the National Assembly on September 21, Choi Su-jin, the People Power Party’s senior floor spokesperson, said afterward that implementing the tax under current conditions would create market confusion and ultimately shrink the market. Weaker domestic trading and an outflow of investment funds overseas could outweigh any increase in tax revenue, she added.

The Democratic Party also has voices calling for a delay and changes to the current framework. Lawmaker Min Byung-duk wrote in a Facebook post on September 22 that losses should not be ignored while only profits are taxed. He proposed introducing tax-loss carryforwards and beginning taxation only after passage of the Digital Asset Basic Act.

Another point of contention is that, with about three months left before implementation, detailed standards for calculating tax liabilities and estimating revenue have yet to be prepared. The Ministry of Economy and Finance and the National Tax Service said they are drawing up detailed reporting standards with industry experts based on overseas tax cases and research findings. Separate tax revenue estimates, however, have not been secured, the report said.