Eastern Asia is the sixth largest cryptocurrency economy in the world this year, accounting for 8.9% of global crypto value received between July 2023 and June 2024. South Korea and Hong Kong stand out as the most crypto-active countries in the region, with institutions driving increased adoption.

Crypto-focused analytic company Chainalysis has released a 2024 Geography of Cryptocurrency Report, with a separate chapter dedicated to the region of Eastern Asia, which includes five of the 50 highest grassroots adopters of cryptocurrency around the world: South Korea (19), China (20), Japan (23), Hong Kong (29), and Taiwan (40).

Most of the robust crypto activity in the region was driven by large transfers typical for institutions and professional investors. Notably, Eastern Asia has the largest share of professional-sized transfers compared to any other region analysed in the given report.

Stance of Crypto in South Korea

South Korea leads the region in terms of cryptocurrency value received (about $130 billion) between July 2023 and June 2024. The growing adoption is boosted by blockchain initiatives by major local corporations like Samsung and other large regional enterprises.?Large cryptocurrency players have also been driven to the country with such a high crypto demand.

As we reported in June, the Ripple blockchain company launched a fund in South Korea and Japan to drive innovations on the XRP Ledger and expand its presence in the Asia-Pacific region. Ripple, with its fast transfer speed and low transaction fees, has been popular in Korea since 2017, when it was expected to replace the SWIFT international remittance system.

Ten months earlier, one of the top South Korean banks, KEB Hana Bank, partnered with the cryptocurrency custody firm BitGo Trust Company to jointly establish a digital asset custody service. The bank, with a 111-branch network, local banking assets of nearly $10 billion and equity of $490 million, reportedly expects to strengthen trust in the domestic digital asset market and consumer protection with the new partnership.

Another reason for the growth of crypto transactions in South Korea is the so-called Korean Premium Index. It refers to the phenomenon where prices of cryptocurrencies in South Korea’s market are higher compared to global markets. South Koreans leverage this opportunity and often use local exchanges to on-ramp and move funds to global exchanges.

Hong Kong Is an Emerging Crypto Hub

Hong Kong has emerged as a crypto hub in the Greater China region, utilising its distinct legal and regulatory framework with more flexibility to foster financial innovation.

In 2023, this Special Administrative Region of China proposed milder crypto regulations that would let retail investors trade certain “large-cap tokens” on licensed exchanges, attracting representatives of the virtual asset industry. Hong Kong also updated existing licencing guidelines to accept applications from crypto trading platforms and create a regulated environment for virtual asset trading in the region.

This April, Hong Kong launched spot Bitcoin and Ethereum exchange-traded funds (ETFs), the first crypto ETFs in Asia and the first Ethereum ETFs globally.

“These ETFs have not only provided a regulated pathway for investment in digital assets, but have also spurred interest in direct holdings in BTC and ETH. This shift is significant, as it marks a transition from traditional financial instruments toward more direct engagement with digital assets, reflecting a broader acceptance and understanding of their potential within the institutional investment community.”

Kevin Cui, Chief Executive Officer of OSL crypto trading platform

During the reported period, Hong Kong experienced the largest year-over-year growth in Eastern Asia at 85.6%, and it now ranks 30th in the world on Chainalysis Global Crypto Adoption Index.

Hong Kong is also believed to be a potential sandbox for China to test virtual asset trading, which is still banned in the mainland. As noted by the report, Chinese investors display an enduring interest in crypto, driven by negative sentiment toward the Chinese economy and the search for faster options to move money. Statistics show an increasing use of OTC crypto in China, particularly since the Chinese real estate market tumbled last year.