South Korea's Web3 Market Transformation: Can It Shake Off the "Liquidity Export" Label by Q1 2025?

Original Article Title: "Q1 2025 South Korea Web3 Market Report: Is South Korea Still a Liquidity Exporter?"

Original Source: Tiger Research

Key Takeaways

· From Liquidity Export to Industry Ecosystem: In Q1 2025, the South Korea Web3 market reached a turning point. This market, once seen as a global project "liquidity exporter," is transitioning into a structured self-sustaining industry ecosystem.

· Impact of Corporate Account Regulation Easing: As part of the Financial Services Commission roadmap, institutional entities are gradually being allowed to conduct cryptocurrency transactions through corporate accounts.

· Ecosystem Development Led by Global Projects: Projects such as Avalanche, TON, Ripple, and Solana are actively establishing a long-term presence in South Korea. Their activities have gone beyond marketing efforts, focusing on developer community building and hackathon hosting.

1. South Korea Web3 Market in Q1 2025: Still Just a Liquidity Exporter?

Despite active retail participation and ample liquidity, institutional infrastructure development in the South Korea Web3 market has been limited. Regulatory efforts have prioritized investor protection over ecosystem development, delaying broader industry growth.

The two main obstacles are: 1) restrictions on the association of corporate accounts with cryptocurrency exchanges; 2) the high entry barrier to obtaining a Virtual Asset Service Provider (VASP) license. Companies are unable to link their corporate accounts to local exchanges, making it theoretically infeasible to convert operationally obtained cryptocurrency into fiat currency through South Korean financial institutions. While some companies have resorted to overseas entities as a temporary solution, this approach carries regulatory risks and does not offer a sustainable long-term resolution.

The high entry barrier for VASP registration has also been a major constraint on market development. While registration is technically feasible for small-scale operations, large projects continue to face legal and regulatory uncertainties. These institutional constraints, coupled with investor activities far exceeding the maturity of the local ecosystem, have led some projects to primarily view South Korea as a customer acquisition channel. Against this backdrop, the external characterization of the Korean market as a "liquidity exporter" has become difficult to refute.

The market developments in Q1 2025 indicate that South Korea has the potential to shift from a speculation-driven market to an industry revival-oriented market. Recent regulatory improvements (such as allowing corporate accounts for cryptocurrency transactions) signify substantial progress in structural transformation. Beneath the surface, supported by the expanding builder community and the emergence of new initiatives, global projects are steadily constructing the local ecosystem. The South Korea Web3 market is at a crucial turning point. As the ecosystem matures beyond an investor-driven development model, with institutional readiness and sustained investment interest, it is expected to generate greater long-term value.

2. Institutional Progress: Allowing Corporate Accounts for Cryptocurrency Transactions

In South Korea, restrictions on corporate entity cryptocurrency transactions began with the 2017 "Park Sang-ki Ban." This policy, led by then-Minister of Justice Park Sang-ki, essentially prohibited financial institutions and companies from participating in cryptocurrency transactions. Although the guidance has expired, this practice continues to this day, creating a dual system where individuals can trade within a regulatory framework while corporate entity investment activities are restricted.

Source: Tiger Research

To address these limitations, the Financial Services Commission (FSC) officially announced the "Corporate Participation in the Cryptocurrency Market Roadmap" on February 13, 2025. The key highlight of this roadmap is the phased lifting of the seven-year restriction on corporate cryptocurrency trading.

· Phase 1 (Starting in the second quarter of 2025): Opening accounts to law enforcement agencies, non-profit organizations, and cryptocurrency exchanges, limited to asset liquidation purposes only

· Phase 2 (Starting in the second half of 2025): Allowing publicly listed companies and registered investment firms, among other professional investors, to engage in trading

· Phase 3 (Medium to Long Term): Fully opening the market to ordinary enterprises

In the first phase, starting from November 2024, law enforcement agencies such as prosecutors, tax authorities, and local governments have already begun to receive account permissions to facilitate the liquidation of seized cryptocurrency. Non-profit organizations and exchanges are expected to follow suit in the second quarter of 2025. The second phase marks a more significant shift. Starting in the second half of 2025, publicly listed companies and professional investment firms will be allowed to engage in cryptocurrency transactions for investment and asset management purposes.

However, most Web3 projects fall under the third phase as ordinary enterprises. To qualify for the second phase, companies must maintain a minimum of 100 billion South Korean won (approximately $7 million) in financial investment product balances according to the Capital Market Act, with an external auditing entity requirement of 50 billion South Korean won (approximately $3.5 million)—a threshold that most Web3 companies are unable to meet.Therefore, the majority of Web3 projects cannot immediately benefit from the new regulations. However, the roadmap still indicates a gradual relaxation of regulatory constraints. As the third phase progresses, direct market access for Web3 native enterprises will become increasingly feasible.

2.1. Positive Implications of Allowing Corporate Trading Accounts

1. Establishing Legal Foundation for Korean Businesses to Conduct Web3 Business

2. Enhancing Market Stability Through Institutional Investors with Structured Risk Management and Long-Term Strategies

3. Driving Diversification of Financial Services, Including Cryptocurrency Funds and Custody Services

Web3 projects often utilize native token swapping services and resources. However, in Korea, businesses have had almost no legal way to settle acquired crypto assets. The new policy establishes a critical entry point for enterprise compliant operations, promoting the regularization of crypto-related business activities. This progress is expected to further expand in the second half of the year, extending transaction permissions to listed companies and registered institutional investors. Unlike retail investors, corporate investors tend to adopt a structured risk management framework and a long-term investment strategy. Their entry into the market is expected to reduce volatility, supporting the sustainable development of the Korean Web3 ecosystem. In addition, broader corporate participation may improve the persistent inefficiency issues in the local market, most notably the "Kimchi Premium."

The increase of institutional participants is also expected to broaden the scope of crypto-related financial services. Asset management companies may introduce cryptocurrency funds or acquire custody service providers to offer comprehensive solutions. Fintech companies may develop corporate treasury tools that support crypto account management. These developments, by strengthening complementary service infrastructure and attracting more traditional financial institutions, will boost the expansion of the Korean Web3 industry.

2.2. Potential Risks of Allowing Corporate Crypto Accounts

1. Phased deregulation could lead to supply-demand imbalances, exerting downward pressure on price formation

2. With the entry of listed companies and institutional investors, government efforts to ensure tax compliance are expected to intensify

3. Institutional investors' conservative risk management may result in Bitcoin concentration holdings, raising concerns about the decline in altcoin market activity

The introduction of corporate accounts may have a substantive impact on retail participants. From a market dynamics perspective, phased deregulation could result in imbalances in buying and selling pressures. According to the FSC's corporate roadmap, regulators perceive the selling activity risk of enterprises relatively low. Therefore, by the end of 2025, only seller liquidity may enter the market, leading to downward price pressure. Although the expected selling volume may remain moderate compared to the overall market, low liquidity tokens may face greater volatility.

On the regulatory front, as listed companies and institutional investors fully enter the market, government efforts to ensure tax compliance are expected to intensify. Although cryptocurrency taxation has been postponed until January 1, 2027, the presidential election on June 3, 2025, may change the policy direction, warranting close attention. In terms of investment behavior, corporate capital may flow dominantly into Bitcoin. As demonstrated by entities like U.S.-based Strategy (formerly MicroStrategy) and Japan's Metaplanet, institutional investors tend to allocate significant portions of their resources to large-cap stable assets due to conservative risk management. This influx may channel significant funds into Bitcoin or impact the altcoin market—Korean retail investors have historically been highly active in this market. As a result, the altcoin market may face a weakening of interest and decreased liquidity in the medium term.

3. Industry Transformation: Strategic Layout of Global Web3 Projects

Following the US and China, South Korea has emerged as a key strategic market for global Web3 projects. In response, numerous international teams are actively recruiting Korean talent and establishing substantive partnerships, demonstrating a strategic shift from surface-level marketing to building a sustainable, builder-driven local ecosystem. This long-term approach not only supports the growth of individual projects but also enhances the overall competitiveness of the Korean Web3 industry.

3.1. Project Support: Guiding Industry Direction by Supporting Mature Teams

Source: Avalanche Korea X

Avalanche and the TON Foundation are global project exemplars that have directly supported local Korean teams in building the ecosystem. Following a successful collaboration with "MapleStory," Avalanche has expanded its cooperation with small and medium-sized Korean projects. The team hosts quarterly demo days to showcase usable products and actively engage users, forming a feedback loop that provides tangible value to projects and participants. The TON Foundation, through the launch of the "TON Society Korea Builder" program, has taken a more structured approach. This program includes a formal project database, a systematic support framework, and expanded network access to strengthen the local TON ecosystem in a scalable manner.

These ecosystem support strategies have yielded tangible results beyond short-term exposure or engagement metrics. Validated local developers have gained a more stable growth foundation, with their success stories providing clear guidance for newcomers. Simultaneously, these initiatives have laid the groundwork for the international expansion of Korean projects.

3.2. Hackathons: Nurturing Korean Builders and Enhancing Market Potential

Hackathons hosted by XRPL Korea (Ripple) and Superteam Korea (Solana) have surpassed individual events to become a key inflection point in the Korean Web3 ecosystem. In March, Ripple held a two-day "DE-BUTHON 2025," attracting 24 teams and 203 participants. Superteam Korea, in collaboration with 22 global partners, organized the "SEOULANA HACKATHON," with over 300 participants.

The scale and success of these events have helped change the perception of South Korea as a speculation-driven market. The high participation in large-scale hackathons reflects the existence of a strong builder ecosystem. These events have now become a strategic launchpad — providing builders with a clear market entry path, bridging the gap between prototype development and actual deployment.

As of the first quarter of 2025, driven by ecosystem-building initiatives led by a globalized network (rather than mere capital inflow), the South Korean Web3 industry is beginning to show measurable progress. Through enhanced collaboration with established players and developer support programs, a new generation of local builders is being nurtured. These developments mark a new phase of momentum in the South Korean Web3 space. Building on this foundation, South Korean projects are poised to deliver substantial innovation to the global stage in the coming years.

4. From Investment-Driven to Industry-Driven: A Turning Point for the South Korean Web3 Market

In the first quarter of 2025, the South Korean Web3 market witnessed a key transformation — shifting from an investment-driven environment to a mature industry ecosystem. Regulatory advancements, such as the phased opening of corporate cryptocurrency accounts, have laid the groundwork for structured market participation. Concurrently, the continued ecosystem development efforts of global Web3 projects are aiding the South Korean market in achieving a position of long-term growth.

Another significant milestone is the successful completion of the Bank of Korea's Central Bank Digital Currency (CBDC) "Han River Project" first retail user real-world transaction. At the same time, major South Korean commercial banks began jointly exploring the issuance of a Korean won stablecoin in early April. South Korean banks have also indicated a more proactive role in future regulatory legislation. On the infrastructure front, ongoing discussions about the "one exchange platform, multiple banks" system suggest a potential structural breakthrough. Under this model, cryptocurrency exchanges will no longer be limited to a single banking partner but can interface with multiple commercial banks. This move is expected to significantly enhance market flexibility and user access.

Overall, these developments clearly demonstrate the evolution of the South Korean Web3 space towards a sustainable industry ecosystem. After years of regulatory constraints and structural inefficiencies, South Korea is entering a new stage characterized by policy coordination, institutional involvement, and the initial signs of industrial-level growth.

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