South Korea Crypto Inflows Plummet Ahead of Taxation Deadline

South Korea's cryptocurrency exchange inflows have halved ahead of the country's virtual asset taxation, set to begin in January next year. According to data analyzed by People Power Party lawmaker Park Soo-young, net asset inflows into South Korea's major exchanges totaled 2.05 trillion won ($1.5 billion) from January to August this year, a 56.8% decline from the same period last year.

The funds held in Korean won at these exchanges have also decreased significantly, with deposits falling by 32.3% over the same period. In contrast, money moving to overseas exchanges has surged by more than 70%, with Korbit and Gopax experiencing net outflows of 480.2 billion won ($355.2 million) in the first eight months of this year.

The implementation of the virtual asset tax has raised concerns about capital flight abroad, with investors shifting from won-denominated holdings to dollar-pegged assets such as stablecoins. The scale of stablecoin-linked amounts at South Korean exchanges grew 28.7% over the same period, with the ratio relative to won deposits nearly doubling.

The government has yet to produce proper tax revenue estimates or detailed tax calculation standards, despite the deadline for implementation being less than three months away. In the National Assembly, calls have been made to scrap the tax and improve the system, with lawmakers arguing that hasty taxation will encourage overseas capital outflows and harm young investors.