Operating profits at South Korean cryptocurrency exchanges fell 78% in the first half of 2026, according to data released Thursday by the Korea Financial Intelligence Unit (KoFIU), as trading volumes, market capitalization and customer deposits all contracted sharply.

The regulator's semiannual survey, covering the period from Jan. 1 through June 30, found that average daily trading volume across domestic virtual asset exchanges declined 44% compared with the previous six months. Market capitalization of assets held on the platforms dropped 33%, while won-denominated customer deposits fell 35%. Exchange sales fell 41% over the same period.

The figures draw on responses from 26 registered virtual asset service providers: 17 exchange operators and nine custody and wallet providers. Notably, the slump in revenue and profits occurred even as the number of accounts eligible to trade rose slightly, by 0.4%, suggesting the decline stems from reduced activity per user rather than customer attrition.

For exchange operators such as Dunamu, the company behind Upbit, and Bithumb, the operational consequences are direct. Exchange revenue in South Korea is dominated by trading fees, so a 44% contraction in daily volume translates almost mechanically into the 41% sales decline and the steeper 78% fall in operating profit recorded by KoFIU. The data implies that fixed compliance, security and staffing costs now weigh far more heavily on thinner revenue bases across the sector.

The first-half deterioration fits a broader pattern of retail capital rotating out of crypto and into South Korea's equity market. In May, the value of crypto held by South Korean investors had already fallen 50.2% over roughly a year, to 60.6 trillion won ($41.4 billion). Korean outlet ChosunBiz linked that decline to capital moving toward stocks.

A Cointelegraph analysis published in July reinforced the trend. Combined average daily volume across Upbit, Bithumb, Coinone, Korbit and Gopax fell approximately 89% year over year during comparable seven-day measurement periods. Over the same 12 months through July 22, the KOSPI, South Korea's benchmark stock index, more than doubled.

The divergence between the two markets presents a structural challenge for Korean exchanges that have historically relied on outsized retail participation. Korean traders, often described as "kimchi premium" drivers in prior cycles, have been a persistent source of global spot demand. Their absence from crypto order books while equity markets rally suggests the profit squeeze is demand-driven rather than the result of supply-side constraints or regulatory closures.

Cointelegraph contacted Bithumb and Dunamu for comment on the results.

The pressure on exchange economics arrives alongside an evolving compliance regime. South Korea recently lowered the Travel Rule threshold for crypto transfers, increasing the number of transactions subject to mandatory originator and beneficiary information sharing. For the 26 registered VASPs in KoFIU's survey, the second half of 2026 will test whether they can sustain compliance expenditure on depressed fee income, and whether any recovery in Korean retail crypto participation materializes before margin compression forces consolidation among the country's smaller platforms.