South Korea’s stock market soars on crypto frenzy

South Korea’s stock market has surged this month amid an investor frenzy centered on won-based digital currencies, following President Lee Jae-myung’s pledge to legalise crypto assets backed by the national currency.

Shares of companies linked to the Bank of Korea’s digital currency initiative, including Kakao Pay and LG CNS, have experienced dramatic gains. Kakao Pay’s stock more than doubled, while LG CNS rose nearly 70 per cent before some recent profit-taking, Financial Times reports.

On the Kosdaq junior market, fintech security firm Aton’s shares jumped 80 per cent, and mobile game developer ME2ON tripled after launching a dollar-pegged stablecoin for casino games through its subsidiary.

Fueled by retail enthusiasm for the likely issuance of won-based stablecoins and expectations of shareholder-friendly government policies, the Kospi Composite index has climbed almost 30 per cent this year, reaching a near four-year high. This rally has made South Korea the top-performing market in Asia in the first half of 2025.

The surge in the market has encouraged retail investors to increase leverage, with margin loans hitting Won20.5tn ($15bn), according to the Korea Financial Investment Association. This enthusiasm persists despite the government yet to release detailed cryptocurrency regulations.

Investor optimism has been driven by President Lee’s appointment of digital token advocate Kim Yong-beom as chief policy adviser and a recent parliamentary bill proposing to promote the digital asset industry. The legislation would permit companies with as little as Won500mn in equity capital to issue won-based stablecoins, a move critics warn could expose the market to systemic risks from undercapitalized issuers.

South Korea remains one of the world’s most active crypto markets, with about 20 per cent of the population trading digital assets. Trading of US dollar-pegged stablecoins in the country reached Won57tn in the first quarter, intensifying pressure on the Bank of Korea to expedite its own digital currency issuance plans.

Banks, brokerages, and fintech firms have expressed strong interest in entering the stablecoin market, although the government has yet to finalize decisions on issuers and timing. Meanwhile, Bank of Korea governor Rhee Chang-yong has voiced concerns about non-bank stablecoin issuers, citing potential impacts on capital flows and monetary policy effectiveness. The central bank is consulting major commercial banks ahead of a second pilot test for its digital currency.

Despite the rally, experts warn that some stocks driven by the digital token hype may be overvalued and urge investors to exercise caution amid volatile trading and regulatory uncertainties.

By Sabina Mammadli