South Korean crypto industry faces crisis amid regulatory pressure

South Korea's digital asset industry is facing a severe crisis under the leadership of Financial Services Commission (FSC) Chairman Lee Eog-weon, The Fact reported. The situation has escalated following poor first-quarter earnings from major South Korean exchanges Upbit and Bithumb, and a decision by Coinone to enter a legal battle against sanctions from financial authorities. This has created an unprecedented situation where all three of the country's major exchanges are engaged in administrative lawsuits with financial authorities. A series of sanctions by the FSC's Financial Intelligence Unit (FIU) is seen as a direct blow to the exchange industry. Additionally, a provision in the proposed Digital Asset Basic Act, championed by Chairman Lee, that would limit the equity stakes of major shareholders in exchanges has been identified as a key obstacle to industry development. People Power Party lawmaker Kim Sang-hoon noted that a staggering 160 trillion won (approx. $115.9 billion) in domestic capital flowed to overseas markets in 2025. He described this as a "painful indicator" of how far the country's capital market efficiency and institutional capacity lag behind global standards.