Analysis of the South Korean Web3 Market in Q1 2025: From Liquidity Export to Industrial Ecosystem

In the first quarter of 2025, the South Korean Web3 market will reach an important turning point. This market, which was once regarded as a "Liquidity export" for global projects, is transitioning to a structured self-sustaining industrial ecosystem.

Main Development

1. Improved regulatory environment: The Financial Services Commission has released a roadmap that gradually allows institutional entities to conduct cryptocurrency transactions through corporate accounts.

2. Global projects deeply cultivate the local market: Projects like Avalanche, TON, Ripple, and Solana are actively establishing a long-term foundation in South Korea, focusing on developer community building and hosting hackathons.

3. From speculation to industry: The market is shifting from an investment-driven model to one focused on industrial revitalization.

Market Status and Challenges

Despite active participation from retail investors and ample liquidity, the institutional infrastructure development in the South Korean Web3 market has made limited progress. Regulatory efforts prioritize investor protection over ecological development, delaying broader industry growth.

Main obstacles include:

• Restrictions on the association between enterprise accounts and cryptocurrency exchanges
• High entry barriers for obtaining a Virtual Asset Service Provider (VASP) license

These institutional constraints have led some projects to primarily view South Korea as a customer acquisition channel. However, the market development in the first quarter of 2025 indicates that South Korea has the potential to shift from a speculation-driven market to an industry revitalization-oriented market.

Regulatory Progress: Corporate Cryptocurrency Trading

The Financial Services Commission announced the "Roadmap for Corporate Participation in the Cryptocurrency Market" on February 13, 2025, planning to lift the corporate cryptocurrency trading restrictions that have been in place for seven years in three phases:

1. Phase One (Starting from Q2 2025): Accounts will be opened to law enforcement agencies, non-profit organizations, and cryptocurrency exchanges, limited to asset liquidation purposes.

2. Phase Two (starting in the second half of 2025): Allow listed companies and registered investment companies, among other professional investors, to trade.

3. Phase Three (Medium to Long Term): Fully open the market to ordinary enterprises.

Positive Significance

1. Establish a legal foundation for Korean enterprises to develop Web3 business.
2. Enhance market stability through institutional investors equipped with structured risk management and long-term strategies.
3. Promote the diversification of financial services, including cryptocurrency funds and custody services.

Potential Risks

1. Gradual deregulation may lead to an imbalance between supply and demand, putting downward pressure on prices.
2. With the entry of listed companies and institutional investors into the market, the government's efforts to ensure tax revenue are expected to strengthen.
3. The conservative risk management of institutional investors may lead to concentrated holdings of Bitcoin, raising concerns about the decline in the activity of the altcoin market.

Strategic Layout of Global Web3 Projects

Following the US-China relationship, South Korea has become a core strategic market for global Web3 projects. International teams are actively recruiting Korean talent and establishing substantial collaborations, demonstrating a strategic shift from superficial marketing to building a sustainable, builder-led local ecosystem.

Project Support

Avalanche and the TON Foundation support local teams in South Korea to build the ecosystem. Avalanche hosts demonstration days every quarter, and the TON Foundation has launched the "TON Society Korea Builder" program, providing systematic support.

Hackathon

The large hackathon hosted by XRPL Korea (Ripple) and Superteam Korea (Solana) has become a key turning point for the Web3 ecosystem in South Korea, nurturing builders and strengthening market potential.

Future Outlook

In the first quarter of 2025, the South Korean Web3 market will undergo a key transformation, shifting from an investment-driven environment to a mature industrial ecosystem. Regulatory progress lays the foundation for structured market participation, while the ongoing ecological development efforts of global Web3 projects will support the South Korean market in achieving long-term growth positioning.

Other important developments include:

• The Bank of Korea's Central Bank Digital Currency (CBDC) "Han River Project" has completed its first retail user real-world transaction.
• Major commercial banks begin to jointly explore the issuance of the Korean won stablecoin.
• Discussion on the "One Exchange - Multiple Banks" system suggests potential structural breakthroughs.

Overall, the Web3 field in South Korea is evolving towards a sustainable industrial ecosystem, entering a new stage characterized by policy coordination, institutional participation, and the initial emergence of industrial-level growth.