South Korea’s crypto market grew to 55 trillion won ($45.9 billion) by the end of 2021, as per a new study from the country’s chief financial regulator, the Financial Service Commission.

South Korea is considered among the strictest crypto markets in terms of regulatory policy implementations and made regular headlines throughout 2021 for its new Travel Rule and Know Your Customer requirements. However, the Korean crypto market has bloomed to new heights despite the regulatory scrutiny in 2021.

The FSC analyzed transaction data from the 24 licensed crypto exchanges and revealed that daily transactions on Korean crypto exchanges reached 11.3 trillion won ($9.4 billion). The combined operating profit of 24 businesses came to 3.37 trillion won ($2.8 billion). A total of nine crypto exchanges reported a net loss over the past year.

The crypto trading market was dominated by the national fiat, the Korean won, which accounted for 95% of the total crypto transactions, mainly from Upbit, Bithumb, Coinone and Korbit.

The domination of won in the Korean crypto market is attributed to a new crypto license regulation issued in 2021, that required crypto exchanges to open real-name bank accounts of traders in association with a certified bank. The particular regulations forced nearly 200 small and medium crypto exchanges out of business as banks refused to partner or offer any of their services.

Related: Korea’s crypto market is among the strongest — and the strangest — in the world

The FSC report published by The Korea Herald suggests there are a total of 15.3 million registered crypto exchange users, out of which only 5.58 million people participated in trading in 2021. Out of these 5.58 million crypto users, nearly 3.1 million users hold crypto assets worth less than 1 million won ($850), while 15% of the traders hold virtual assets worth more than 10 million won ($8,500).

South Korea’s crypto license regulations wiped out the majority of the medium and small exchanges in the country, banning transactions from the private wallets and flagging transactions above a certain amount, and those that survived had to adhere to strict privacy laws. 

Another proposal was issued in November for token issuers aimed at recovering illegally acquired funds, doling out criminal punishments and protecting investors from future malfeasance.

By the final quarter of 2021, the focus of Korean regulators shifted toward crypto taxation, with a proposal to impose a 20% tax on crypto profits. However, in absence of clear regulations for the market, the tax policy was delayed for another year.

The country has also shifted its focus on nonfungible tokens in the recent past and might become one of the first nations to issue NFT tax regulations.