Institutions Drive Crypto Adoption in Eastern Asia, Chainalysis Report Finds

Eastern Asia is witnessing a significant surge in cryptocurrency adoption, driven primarily by institutional investors in regions like South Korea and Hong Kong, according to a recent report by Chainalysis.

Eastern Asia's Crypto Economy

Eastern Asia ranks as the sixth largest cryptocurrency economy globally, accounting for 8.9% of the global value received between July 2023 and June 2024. During this period, the region received over $400 billion in on-chain value. The report highlights that the region's share of cryptocurrency transaction value has remained stable, with centralized exchanges (CEXes) being the most popular service category, accounting for 64.7% of the value received.

Most of this activity is driven by large transfers indicative of institutional and professional investors. Eastern Asia holds the largest share of professional-sized transfers compared to other regions studied in the report.

South Korea: Leading the Charge

South Korea emerges as the largest market in Eastern Asia, receiving approximately $130 billion in cryptocurrency value. The country's share of transaction value has been steadily increasing since Q1 2023. Factors contributing to this growth include mistrust in traditional financial systems and the adoption of blockchain technology by major corporations like Samsung.

A leader at a top South Korean crypto exchange noted, “The public's perception of crypto as a viable investment option has been further solidified by the adoption of blockchain by major corporations in the region.”

South Korea's interest in altcoins and stablecoins has also surged, especially after Bitcoin (BTC) surpassed $70,000 in January 2024. Altcoins, primarily traded with the Korean Won (KRW), have seen higher outflows to global exchanges than any other crypto asset. The increase in stablecoin outflows began in December 2023, coinciding with USDT listings on major Korean exchanges.

Hong Kong's Regulatory Push

Hong Kong has emerged as a significant crypto hub in the Greater China region, thanks to its supportive regulatory framework. The region has experienced the largest year-over-year growth in Eastern Asia at 85.6%, ranking 30th globally on the Chainalysis Global Crypto Adoption Index.

In June 2023, Hong Kong's securities regulator implemented a new regulatory regime for virtual asset trading platforms (VATPs), providing a regulated path for retail investors to access crypto. By May 31, 2024, exchanges could only operate if they were licensed or “deemed” to be licensed. This has led to a shift towards regulated exchanges.

Stablecoins accounted for over 40% of the total value received by Hong Kong each quarter. This is expected to grow as the Hong Kong Monetary Authority's regulatory framework comes into force, permitting regulated stablecoins for retail investors.

China's Crypto Landscape

China has had a tumultuous relationship with cryptocurrency, marked by numerous crackdowns and regulatory changes. Despite this, Chinese citizens have turned to over-the-counter (OTC) platforms and P2P trading networks to preserve wealth.

Ben Charoenwong, associate professor of finance at INSEAD, noted, “The general sentiment toward the Chinese economy has been negative, so people are looking for ways to move money out of the country. The increasing use of OTC crypto in China suggests that people are looking for faster options to move money.”

Future Prospects

The burgeoning interest in altcoins and diverse trading opportunities signals a robust future for South Korea as a regional leader in cryptocurrency innovation. Meanwhile, Hong Kong's supportive regulatory frameworks are expected to further accelerate institutional adoption across Eastern Asia.

For more detailed insights, visit the Chainalysis blog.