Global expansion remains distant dream for Korean crypto exchanges
A man holds a phone displaying a Bitcoin trading chart at Bithumb's customer center in Seoul, January 2024. Korea Times photo by Shim Hyun-chul
As Korea's regulatory landscape poses major challenges for global cryptocurrency firms looking to enter the market, domestic players, too, struggle to expand abroad amid similar constraints, industry officials said Monday.
This is particularly evident in the case of Korea's five major cryptocurrency exchanges, which continue to operate exclusively within the country despite their strong competitiveness and ample liquidity.
Upbit APAC, for instance, operates subsidiaries in Singapore, Indonesia and Thailand. However, Dunamu, the operator of Upbit, holds no equity stake in those firms. Their relationship is limited to business partnerships involving technical support and licensing agreements.
Bithumb once pursued global expansion by establishing entities in the U.K., Thailand and Japan, but withdrew in 2018 and now focuses solely on its domestic operations. Coinone exited the Indonesian market in 2020, while Korbit and GOPAX have made no direct overseas moves.
Insiders say the biggest obstacle is regulatory ambiguities. No rules governing the global expansion of domestic crypto firms have been established or clarified for years. Nevertheless, a persistent negative sentiment toward the industry continues to hamper momentum.
Banks also reportedly refuse international remittance requests from virtual asset service providers seeking to establish foreign entities, citing money laundering concerns and lack of guidance.
"Overseas investments and business operations have become virtually impossible since overseas remittances are blocked," former Dunamu CEO Lee Sirgoo told reporters in 2018 during the firm's push for global expansion. "No matter how much we try to explain to the banks, the only response we get is that it can’t be done. It's a frustrating situation."
A man walks past a store that exchanges cryptocurrencies in Hong Kong, December 2024. Reuters-Yonhap
This de facto ban has continued ever since.
What's unfortunate is that Korean exchanges are considered competitive even on a global scale. Their user-friendly experience and sleek interfaces are widely recognized, and the domestic market's scale and liquidity have fostered strong technical capabilities.
Staying confined to the local market risks eroding that advantage.
The market has matured, but it remains heavily driven by retail investors. As a result, trading volumes start to drop sharply when investor interest wanes.
In June, for instance, expectations surrounding President Lee Jae Myung's market-friendly policies boosted investor sentiment in the stock market. This, in turn, slowed crypto trading volumes, with Korean exchanges' share of global fiat-to-crypto volume falling from 41 percent in January to about 32 percent in the first week of July, according to Kaiko, a crypto data tracker.
At the same time, Korean investors face few barriers to using global platforms that offer more diverse services, such as derivatives. Already, Coinbase, the largest cryptocurrency exchange in the U.S., operates in over 100 countries.
Dessislava Ianeva-Aubert, a senior research analyst at Kaiko, noted that Korean exchanges face steep competition from offshore platforms.
"Now, with regulated U.S. exchanges entering the perps (perpetual futures) space, Korean exchanges risk falling further behind unless domestic regulatory structures evolve, and they aggressively expand both their product suite and infrastructure to compete at a global level," she said.
Employees of Coinbase pop the corks on bottles of champagne in New York's Times Square, April 2021, as Coinbase Global starts trading on the Nasdaq. UPI-Yonhap
Industry officials emphasize that going abroad offers a valuable opportunity to gain hands-on experience in operating new services and catering to foreign investor preferences. Since derivatives often generate volumes several times higher than spot markets, they could also serve as a revenue cushion during downturns.
"Given the size and liquidity of the Korean market, domestic players have already built strong technical expertise. That makes overseas marketing and foreign currency earnings viable," said Han Suh-hee, a lawyer at Barun Law.
While allowing foreign investors to trade on domestic exchanges involves various considerations, overseas expansion itself could be relatively straightforward, according to experts. The real question is whether Korean authorities are willing to incorporate virtual asset businesses into the current framework.
"Virtual asset service providers are not classified as financial institutions, so current regulations don't formally apply to them. If they were included within that framework, overseas expansion could proceed without major hurdles," said Chun Chang-min, a business professor at Seoul National University of Science and Technology.
"Since the government has already announced a phased approach to opening up corporate ownership, I hope for foreign participation to be taken into consideration," he added.
Exchange officials also expressed cautious optimism. "I believe these issues may ultimately be resolved over time," one official noted. "We will actively work to strengthen internal controls in the meantime."