Regulatory Challenges Cause Fluctuations in Kimchi Premium for 2025

The Kimchi Premium, a persistent gap in pricing between

(BTC) on South Korean platforms and international exchanges, has experienced notable swings in 2025, highlighting evolving trends among major and institutional investors. On September 27, 2025, Bitcoin traded at a 3.21% premium on South Korea’s Upbit compared to global rates, reversing the earlier “Kimchi Discount” period when was up to 2% cheaper locally Bitcoin Shows 3.21% Kimchi Premium in Korean Market on … [ 3 ]. These shifts point to the influence of regulatory changes, liquidity conditions, and investor behavior on the actions of institutions and large holders.

The Kimchi Premium originally arose from South Korea’s strict capital controls, which limit the movement of large amounts of Korean won (KRW) abroad. These measures, established after the 1997 financial crisis, restrict arbitrage and foster local price premiums. Yet, during 2024–2025, the premium turned negative for extended periods, reflecting a change in institutional strategies. Local funds and corporations scaled back crypto investments in response to tighter regulations, such as the

Asset User Protection Act, which enforces stricter KYC/AML checks and reserve reporting Bitcoin Is $2,500 Cheaper in South Korea—What the … [ 2 ]. Unlike individual traders who tend to hold through market cycles, institutions were forced to liquidate positions quickly after regulatory updates, leading to a temporary surplus in the domestic market How to Understand the Kimchi Premium and Its Weird Flip in … [ 1 ].

Retail investor sentiment also had an impact. Blockchain data showed a 22% drop in KRW deposits to Korean exchanges in July 2025, indicating more cautious trading by individuals amid economic uncertainty and regulatory fatigue Bitcoin Is $2,500 Cheaper in South Korea—What the … [ 2 ]. Additionally, the Korean won’s depreciation against the U.S. dollar in 2024 made Bitcoin more expensive for local buyers, further reducing demand. These factors, along with the introduction of a “travel rule” that requires ID checks for crypto transfers above 1 million won, tightened liquidity even more How to Understand the Kimchi Premium and Its Weird Flip in … [ 1 ].

Traditional arbitrage, once used to profit from the Kimchi Premium, became less attractive as hidden costs mounted. Traders faced combined expenses of 3–4% from trading, transfers, compliance, and currency conversion, making arbitrage worthwhile only when the premium surpassed 5–6% How to Understand the Kimchi Premium and Its Weird Flip in … [ 1 ]. During periods of negative premium, savvy traders shifted away from direct arbitrage, instead engaging in premium momentum strategies—buying when the discount was under 2% and selling when it exceeded 8%. Some companies also used both domestic and offshore entities to work around capital restrictions How to Understand the Kimchi Premium and Its Weird Flip in … [ 1 ].

With the Kimchi Premium fluctuating between -3% and +5% in 2025, it signals an ongoing adjustment in South Korea’s crypto landscape. Positive premiums point to robust local demand and speculative activity, while negative premiums suggest risk aversion among institutions or regulatory concerns. Experts note that the increasing occurrence of negative premiums points to deeper structural changes, such as the introduction of crypto taxes in 2025 and possible relaxation of travel rules for smaller transfers How to Understand the Kimchi Premium and Its Weird Flip in … [ 1 ]. These trends could further align South Korean prices with global markets, reducing the Kimchi Premium’s historical volatility.

For large investors and institutions, the Kimchi Premium acts as a real-time indicator of market mood. A positive premium often reflects capital flowing into Korean exchanges, driven by retail enthusiasm or a search for safety during geopolitical tensions. On the other hand, a negative premium signals capital leaving the local market, especially as institutions reduce exposure. The recent swings in the premium highlight the ongoing push and pull between South Korea’s regulatory environment and the international nature of Bitcoin trading, affecting both liquidity and price formation.