What Happened?
Once surpassed by Upbit, Bithumb has successfully achieved a significant recovery in market share starting in 2024 through aggressive marketing strategies, particularly by substantially increasing marketing expenditure and launching a “zero-fee” promotion. The exchange has stabilized its trading volume to account for a quarter of the South Korean market. Bithumb has achieved operational profits and is actively preparing for an initial public offering (IPO) on the South Korean stock market, but currently has no intention of expanding into international markets.
South Korea boasts a large group of cryptocurrency investors (over one-third of the total population), with trading volumes even surpassing traditional stock markets and a strong preference for altcoins among investors. However, the market is also highly concentrated due to strict regulations, leaving only two major domestic exchanges, Upbit and Bithumb, while most global exchanges have retreated due to compliance issues.
The leader of South Korea’s Democratic Party, Lee Jae-myung, has proposed issuing a stablecoin pegged to the Korean won to prevent capital outflows and strengthen financial sovereignty. This proposal has raised concerns among economists, who believe it could lead to inflation of the money supply and a transfer of currency control. Despite the controversy, the Democratic Party has established a “Digital Asset Committee” and is preparing to introduce the “Digital Asset Basic Act,” indicating significant progress in stablecoin regulation and digital asset policy in South Korea.
The Comeback Journey of South Korean Exchange Bithumb
In South Korea, a country passionate about cryptocurrency, the digital asset market is undergoing significant transformation. Once eclipsed by rival Upbit, the cryptocurrency exchange Bithumb is making a strong comeback, reclaiming market share and preparing for its initial public offering (IPO). Meanwhile, discussions in South Korean politics about issuing a stablecoin pegged to the Korean won highlight the unique position and challenges South Korea faces in the digital asset arena.
Bithumb, which was once the leader in South Korea’s cryptocurrency trading, saw its market share plummet to single digits after setbacks like the 2018 hacking incident. However, since 2024, Bithumb has embarked on a remarkable resurgence.
According to Kaiko data, the exchange’s trading volume has stabilized at about a quarter of the South Korean market, peaking at 36%. The revival of Bithumb can be largely attributed to its aggressive market strategies, particularly the significant increase in marketing expenditure. From 16 billion won in 2023, it skyrocketed to 192 billion won in 2024, successfully attracting a large number of traders through promotions such as “zero-fee” trading.
This has enabled Bithumb to achieve an operational profit of 130.8 billion won in 2024, reversing its previous losses. Bithumb is currently actively preparing for an IPO on the South Korean stock market and has selected Samsung Securities as its lead underwriter, aiming to complete the listing by the end of 2025.
Although Bithumb plans to expand its staking features and list new tokens, it currently has no intention of expanding into international markets, mainly due to regulatory and security concerns. This contrasts with its main competitor Upbit, which believes that focusing solely on the South Korean market has a “limited perspective” and is more concerned about its global standing.
South Korea’s Cryptocurrency Craze and Unique Market Structure
South Korea is considered one of the most fervent countries in the global cryptocurrency market. Currently, there are over 18 million digital asset investors in Korea, accounting for about one-third of the total population, with assets valued at approximately 104 trillion won (about 74.5 billion USD) as of December 2024.
Simon Seojoon Kim, CEO of the venture capital firm Hashed, pointed out that South Korea is the second-largest cryptocurrency market by trading volume in fiat currency, only behind the United States. Unlike Western markets dominated by Bitcoin and Ethereum, South Korean retail investors show a strong interest in altcoins (cryptocurrencies other than Bitcoin), making the Korean market attractive for new projects and tokens.
However, the structural limitations of the South Korean cryptocurrency market are also quite evident. Strict regulations have forced many small participants to exit, leaving Upbit and Bithumb as the only major domestic competitors. Additionally, concerns about South Korea’s stringent compliance environment have caused most global exchanges to withdraw.
Controversy Over the Korean Won Stablecoin and Future Prospects
As Bithumb makes a comeback, South Korean politicians are also turning their attention to reforms in cryptocurrency policy. Lee Jae-myung, the leader of the ruling Democratic Party, has proposed an eye-catching suggestion: to create a stablecoin pegged to the Korean won to prevent capital outflows and strengthen national financial sovereignty.
Currently, South Korean law prohibits the issuance of domestic stablecoins, leading local exchanges to mainly rely on USD-pegged stablecoins (such as USDT and USDC). Reports indicate that from January to March of this year, the outflow of assets from South Korean cryptocurrency exchanges reached as high as 56.8 trillion won (about 40.8 billion USD), with nearly half related to stablecoins. Lee believes that establishing a stablecoin market pegged to the won could help prevent the outflow of national wealth.
Lee’s proposal is part of his digital asset strategy, which includes legalizing cryptocurrency spot ETFs and allowing institutional investors like the National Pension Service to invest in cryptocurrencies after meeting price stability criteria. He also suggested creating an integrated monitoring system and lowering transaction costs to make cryptocurrencies more accessible under government supervision.
However, the stablecoin proposal has also raised concerns among economists. Shin Bo-sung, a senior researcher at the Korea Capital Market Institute, warned that stablecoins could lead to inflation of the money supply and transfer currency control to private issuers. He stated, “We must not ignore the economic principles behind it. Stablecoins are essentially another form of banking that creates money out of thin air.”
Despite the controversy, the Democratic Party established a “Digital Asset Committee” on May 13, dedicated to formulating cryptocurrency policy and promoting industry development, emphasizing the importance of addressing regulatory uncertainties, including stablecoin regulation. The party is also preparing to introduce the “Digital Asset Basic Act,” which aims to establish a legal framework for cryptocurrencies and stablecoins, requiring issuers to hold at least 50 billion won in reserves and obtain approval from the Financial Services Commission.
With the gradual improvement of policies, South Korea’s role in the global cryptocurrency landscape will continue to evolve.
References: cointelegraph, bloomberg