Korean currency deposits plummeted 35%: why are traders collectively fleeing overseas leverage?

According to Woofun AI, South Korea's licensed crypto exchanges are experiencing a double loss of traders and funds, and a joint investigation by the Korea Financial Intelligence Service (KoFIU) and the Financial Supervisory Service (FSS) revealed this grim reality. The core crisis is a sharp decline in the attractiveness of the local market, which has led to large-scale capital transfers abroad.

From January to June, regulatory data for 26 licensed virtual asset service providers showed that the total market value of the Korea Exchange fell 33%, evaporating 28.3 trillion won; deposits denominated in won fell 35% to 2.9 trillion won; the average daily trading volume also fell 44%. By the end of June, the total market value of the Korea Exchange fell to about 58.9 trillion won (about 42 billion US dollars), compared to 87.2 trillion won six months ago. Daily turnover fell from 5.4 trillion won to 3.1 trillion won, and customer won deposits fell from 8.1 trillion won to 5.2 trillion won. The exchange's revenue plummeted 78% year over year, from 374.8 billion won to 81.6 billion won. Regulators attributed most of the decline to Bitcoin, and the FSS stated that by the end of June, Bitcoin had fallen 33% to $58,559. The investigation also found that of the 234 tokens listed on a single exchange alone, 93 have an assessed value of less than 100 million won. Regulators say this figure should make users think twice.

Data compiled by Woofun AI shows that this deterioration in asset quality and exhaustion of liquidity have formed a vicious cycle, further weakening the foundations of the local market.

Another deep reason for the decline in deposits is that overseas platforms use high-risk products that are not allowed in the Korean market to attract Korean traders. For example, a perpetual futures contract based on KORU (KORU.US) — KORU is an ETF listed in the US. Its daily rise and fall rate is three times the single-day fluctuation of the Korean Kospi Index. Binance launched the KORU product on June 22, with leverage of 20 times, and raised the upper limit to 50 times four days later. Since the fund itself has tracked three times the index's single-day fluctuation, traders could end up being exposed to up to 150 times as much profit and loss.

Earlier in June, Binance also launched 20x products for Samsung Electronics, SK hynix, and Hyundai. Bybit, OKX, and KuCoin also launched their respective KORU contracts. On June 23, Kospi fell 9.99%, and KORU plummeted 35.7% in a single day to $700.01. These platforms are outside of South Korea's investor protection system. The path for traders is to buy Tether in won at a licensed local exchange and then transfer stablecoins overseas.

Tiger Research collaborated with blockchain analysis company Chainalysis to track approximately 120,000 wallets related to South Korea, and estimated that approximately 700 trillion won (about 530 billion US dollars) flowed out of local exchanges in Korea between 2021 and 2026. According to the agency, the volume of outflows in 2025 is about 120 billion US dollars, and this year it is expected to be close to 52 billion US dollars. From January 2024 to July 2026, wallets held by Koreans invested approximately $1.64 billion into the three decentralized derivatives platforms Hyperliquid, Lighter, and Variational.

In July alone, around 1200 of these wallets completed a nominal transaction volume of $4.97 billion on Hyperliquid. Their most traded products include contracts linked to SK Hynix, Samsung Electronics, and crude oil — these varieties can be leveraged and traded around the clock, even when the regular market is closed. Park Sung-jae, an analyst at Shinhan Securities, said in July that domestic trading volume in South Korea had dropped to about 1.6% of Kospi's turnover at the time. The reason investors left was because overseas crypto exchanges provided a variety of investment methods. He pointed out that these exchanges offer futures and leverage, while in South Korea, spot trading is 'actually the only trading option' available.

The more critical variable is the political game triggered by the new tax policy. South Korea plans to levy a 22% tax rate on the portion of annual crypto earnings over 2.5 million won deductions starting January 1, 2027, and the first filing will expire in May 2028. The petitioners warned that the rule would push more traders overseas and had collected the 50,000 signatures needed to force Congress to consider it. Lawmakers from both the ruling party and opposition parties have proposed plans that may be delayed until 2030. South Korea's finance minister, Lee Hyoung-il, supports the tax on the grounds that 85% of investors hold crypto assets worth less than 5 million won, so even after tax deductions, they won't be greatly affected. Following regulatory arbitrage, policy uncertainty has once again become the core driving force behind capital flight.