South Korea’s Crypto Exchanges See Profits Collapse…

South Korea's 17 registered crypto exchanges earned a combined operating profit of 81.6 billion won ($60.9 million) in the first half of 2026, a 78% decline from the 374.8 billion won they reported in the second half of 2025, according to a Korea Financial Intelligence Unit survey published on 1 October.The survey covered 26 virtual asset service providers in total, including nine custody and wallet operators that posted separate losses.Average daily trading volume across the five won-denominated exchanges fell 44% to 3.1 trillion won, while total crypto market capitalisation held on domestic platforms dropped 33% to 58.9 trillion won from 87.2 trillion won at the end of 2025.

Retail Capital Rotates From Crypto to Equities

The profit collapse coincided with a sharp rally in South Korean equities. The benchmark KOSPI index rose more than 114% over the 12 months to July 2026, according to Yahoo Finance data, drawing retail speculative capital away from digital assets. ChosunBiz, a South Korean financial outlet, attributed the migration directly to equities' outperformance. Won-denominated customer deposits at the five exchanges, Upbit, Bithumb, Coinone, Korbit, and Gopax, fell 35% to 5.2 trillion won from 8.1 trillion won. Combined sales across the 26 providers declined 41%, the KoFIU survey showed. Despite the downturn, trading-eligible accounts edged up 0.4% to 11.175 million, suggesting users held their accounts open even as activity dried up.A separate CoinGecko analysis found that average daily volume across the five won-based exchanges fell roughly 89% year on year by July 2026, from $2.82 billion to $305 million. ZDNet Korea reported a comparable 88% year-on-year decline in the same period.

Custody Losses Double as Smaller Providers Bleed

The nine custody and wallet providers in the KoFIU survey fared worse than the exchanges. Operating losses for the custody segment widened from 9.3 billion won to 18.6 billion won, even as the number of custody accounts rose 2% to 792. Total assets under custody fell 25% to 230.4 billion won.The data underscored how heavily South Korean crypto revenue depends on retail trading fees. Won-denominated platforms accounted for 58.5 trillion won of the market's 58.9 trillion won total capitalization, leaving coin-only exchanges with just 330 billion won and an average daily volume of 380 million won, a rounding error next to the won platforms' 3.1 trillion won.Total staffing across the 26 providers slipped by 10 to 2,021 employees, while anti-money laundering headcount remained effectively flat at 213, up by a single person from the prior period.

A Tax Deadline Looms Over a Weakened Market

The profit slump arrives less than three months before South Korea's 22% tax on annual crypto gains above 2.5 million won takes effect on 1 January 2027. The Ministry of Economy and Finance has rejected further delays to the levy, which has already been postponed multiple times since its original proposal. Exchanges that depend almost entirely on retail spot trading commissions now face a tax regime that could suppress the volume they need to recover profitability.The number of unique crypto assets listed on Korean platforms also declined 5% to 673, while single-exchange-only listings dropped to 234 from 296, indicating a consolidation of traded tokens even as the broader market contracted.The KoFIU publishes its next semi-annual survey covering July to December 2026 in early 2027. Whether the KOSPI rally sustains or stalls will likely determine the pace at which retail capital returns to crypto trading, if it returns at all, before the January tax deadline reshapes the cost of participation.