Stablecoin Outflows Abroad Hit 2.8 Trillion Won a Month

Amid a prolonged slump in the cryptocurrency market, stablecoin funds flowing out of Korea to overseas exchanges are maintaining a scale of several hundred billion won each month. As foreign exchanges roll out spot and futures products linked to Korean stocks beyond cryptocurrencies, the outflow has grown to a level approaching the net buying of overseas stocks by domestic investors.

According to data submitted by the Financial Supervisory Service to Rep. Lee Jong-wook of the People Power Party, a member of the National Assembly’s Finance, Economy and Planning Committee, on the 2nd, the volume of stablecoins transferred from Korea’s five major virtual asset exchanges — Upbit, Bithumb, Coinone, Korbit and Gopax — to overseas exchanges reached 2.7625 trillion won in June this year. In contrast, stablecoins flowing into domestic exchanges from overseas exchanges during the same month amounted to 2.2022 trillion won, bringing the net outflow to 560.3 billion won.

This is comparable to the scale of net buying of overseas stocks by domestic investors. According to the Korea Securities Depository, domestic investors’ overseas stock settlement amounts in June this year were $34.93396 billion in purchases and $34.46142 billion in sales, for a net buying figure of $472.54 million. Converted at June’s average won-dollar exchange rate of 1,527.95 won, this amounts to about 722 billion won, meaning the stablecoin net outflow was equivalent to about 77.6% of overseas stock net buying.

As recently as early last year, the stablecoin net outflow stayed at around 20% of overseas stock net buying. However, with overseas stock investment enthusiasm cooling somewhat recently while stablecoins have steadily flowed abroad, the gap between the two capital flows has narrowed significantly.

In particular, while overseas stocks recorded net selling in some months, stablecoins have seen the volume leaving for overseas exchanges exceed the volume coming in for 18 consecutive months, from early last year — when the related statistics began to be compiled — through June this year. In the second quarter of this year, stablecoins recorded a net outflow of 1.6872 trillion won, while overseas stocks recorded net selling of 1.6185 trillion won.

The market believes a significant portion of the stablecoins that have moved abroad are being used for investment products not offered by domestic exchanges. Overseas exchanges are seeking to secure domestic investors by successively listing not only cryptocurrency futures such as bitcoin but also spot and futures products based on Korea’s leading stocks such as Samsung Electronics, SK hynix and Hyundai Motor. In addition, high-risk derivatives offering leverage of dozens of times are rapidly increasing, while demand for services with limited availability in Korea — such as dollar-based real-world assets (RWA), decentralized finance (DeFi) and staking — is also cited as a reason funds are heading to overseas exchanges.

Rep. Lee Jong-wook said, “As the ‘coin move’ from Korea to abroad spreads, funds are flowing out of the country and investors are being left defenselessly exposed to high-risk derivatives and other products on overseas exchanges.” He added, “The government must comprehensively re-examine its investor protection and management system and hurry to improve regulations.”