Bitcoin’s Kimchi Premium, the price gap between South Korean exchanges and global markets, has climbed to 9.7%, the highest in 10 months.
Reasons Behind the Price Gap
The price gap for Bitcoin in South Korea compared to global markets is the highest since April 2024, when it peaked at 13%. Currently, the premium has eased to 8.24%. This premium arises because of the isolation of South Korea's crypto market from foreign investors due to regulatory restrictions. Arbitrage traders attempting to buy Bitcoin at lower prices on foreign exchanges and sell domestically face capital controls, limiting their ability to close the gap. Min Jung from Presto Research noted that the Kimchi Premium typically rises in bull markets but can also spike in panic selling.
South Korea's Crypto Landscape
South Korea remains one of the most active crypto markets, particularly for altcoin trading. Data from The Block shows that Upbit, the country's largest exchange, processed over $187 billion in transactions in January, making it the fourth-largest centralized exchange globally by trading volume. Despite regulatory strictness, interest in cryptocurrencies remains high.
Future Regulatory Measures
The country's first regulatory framework was implemented last July, focusing on investor protection. Key measures included requiring exchanges to store at least 80% of user cryptocurrency deposits in separate cold wallets. Upcoming legislation aims to take a broader approach, covering service providers and crypto users. Discussion topics include enhancing transparency in cryptocurrency listings on exchanges and applying disclosure standards akin to those in traditional finance, as well as stablecoin regulation.
The current situation with the Kimchi Premium highlights South Korea's unique position in the global crypto market. While market isolation creates price disparities, the country is moving towards stronger regulation to ensure a fair and safe environment for all participants.
