Bitcoin prices are displayed at the Bithumb Lounge in Seoul’s Gangnam District, March 4. Yonhap

The domestic cryptocurrency industry is grappling with mounting concerns over a market downturn as trading activity sharply weakens amid the ongoing stock market boom and as financial authorities move to tighten regulations, industry officials said Sunday.

According to data the Bank of Korea submitted to Rep. Cha Gyu-geun of the minor Rebuilding Korea Party, both domestic investors’ crypto holdings and transaction volumes have fallen by more than half over the past year.

The value of digital assets held by investors at the country’s five cryptocurrency exchanges — Upbit, Bithumb, Korbit, Coinone and Gopax — fell to 60.6 trillion won ($41.4 billion) at the end of February from 121.8 trillion won recorded at the end of January last year.

Average daily trading volume also fluctuated sharply during the period. After climbing to 17.1 trillion won in December last year, trading volume plunged to around 4.5 trillion won by the end of February this year.

“The sharp drop in domestic cryptocurrency holdings appears to have been driven by both capital flowing into the strong local stock market and declines in crypto prices,” Hong Sung-wook, an analyst at NH Investment & Securities, said.

At the same time, the industry is bracing for tighter regulations as financial authorities prepare to implement revised rules under the Act on Reporting and Use of Specified Financial Transaction Information in August to strengthen anti-money laundering oversight.

Under the law, financial institutions and virtual asset service providers are required to comply with obligations such as customer identity verification and suspicious transaction reporting to prevent illicit activities, including money laundering and terrorist financing.

Industry officials are particularly concerned about a proposed rule requiring cryptocurrency transactions exceeding 10 million won involving overseas exchanges or private wallets to be automatically classified as suspicious and reported to the Financial Intelligence Unit.

Digital Asset eXchange Alliance (DAXA), which represents major domestic crypto exchanges, argued that the strengthened regulations could undermine market activity by placing excessive compliance burdens on the industry.

Source: Korea Times News