Key Takeaways

• Democrats have secured majorities in both chambers, with 54 Senate seats and 228 House seats. Control of the digital asset legislative agenda will shift from Republicans to Democrats after two years of Republican leadership.

• Industry critics such as Elizabeth Warren, Sherrod Brown, and Maxine Waters are likely to lead key committees. Their influence will make existing digital asset bills harder to pass, while congressional attention is expected to turn to investigations into World Liberty Financial (WLF), the Trump family’s digital asset business.

• Even moderate and pro-crypto Democrats want conflict-of-interest rules for public officials. Negotiations over these provisions could delay the CLARITY Act longer than expected.

• Republicans will focus on defending the GENIUS Act rather than passing new legislation. They can still use the Senate’s 60-vote threshold for overcoming filibusters and the threat of a presidential veto to block Democratic proposals.

• President Trump will face greater constraints on his crypto-friendly agenda. The direction and pace of regulation will depend on how Democrats pursue the Trump family’s business interests and how the White House responds.

1. Where the U.S. Midterm Results Stand

Democrats have secured 54 of the Senate’s 100 seats and 228 of the House’s 435 seats, exceeding the majority thresholds of 51 and 218, respectively. These results represent gains of seven Senate seats and 25 House seats. Two Senate races and 68 House races remain uncalled, but Democratic control of both chambers is already assured.

When the new Congress convenes in January 2027, Democrats will control the legislative agenda and committee chairmanships.

The result matters for digital assets because Republicans led the two major legislative efforts that have shaped the market over the past two years: the GENIUS Act and the CLARITY Act. Democrats will now be able to block further legislation and revisit the framework Republicans have built, with broad implications for the market.

2. Where Elected Democrats Stand on Digital Assets

The Democrats elected to Congress fall broadly into three groups, based on their past statements and records:

1. Traditional critics who view digital assets as an industry designed to evade regulation.

2. Moderates who support clear rules but insist on conflict-of-interest restrictions for public officials and stronger consumer protections.

3. A smaller pro-crypto group that wants to bring the industry into the regulated financial system through a clear legal framework.

The challenge for the industry is that critics are likely to secure the committee chairmanships that determine which bills advance.

Moderates and pro-crypto Democrats are not unconditional allies, either. They also want Congress to address the Trump family’s digital asset businesses, making it unlikely that the current bills will advance unchanged.

2.1. Critics Are Likely to Lead Key Committees

The election has strengthened the position of the industry’s critics within the Democratic Party.

Figures such as Senator Elizabeth Warren, who ran in the 2020 Democratic presidential primary, see digital assets as an industry built to avoid regulation. They have consistently opposed industry-friendly legislation. With Democrats taking the majority, these lawmakers are more likely to lead the committees responsible for digital asset bills.

Senator-elect Sherrod Brown, a former three-term senator from Ohio and former chair of the Senate Banking Committee, is among the industry’s most prominent critics. As committee chair, he prevented crypto legislation from advancing.

At a 2021 stablecoin hearing, Brown argued that stablecoins were neither decentralized nor transparent. He has now won despite crypto-backed political groups spending approximately $63 million to prevent his return to the Senate. That history gives the industry little reason to expect a warmer reception.

Representative Maxine Waters, who has served in the House since 1991, is widely considered the leading candidate to chair the House Financial Services Committee.

Waters is currently the committee’s ranking Democrat. She previously chaired it from 2019 to 2023, becoming the first woman and the first Black person to hold the position. With Democrats regaining the House, she is expected to return to the role.

When the GENIUS Act passed the Senate, Waters criticized it as riddled with loopholes, arguing that there was nothing smart about it despite its name. She also described the recent Binance hack as a warning that the crypto industry cannot operate without strong accountability.

With these lawmakers leading key committees, the digital asset agenda that Republicans advanced over the past two years will face much greater resistance.

Their first target is likely to be World Liberty Financial, the Trump family’s digital asset business. Democrats have already called for Senate hearings following reports that an investor linked to Abu Dhabi’s royal family acquired a 49% stake in WLF for approximately $500 million, four days before Trump’s inauguration.

Congress is also likely to examine why the SEC dropped more than ten digital asset enforcement cases, an issue Waters has already called for an investigation into. Senate Democrats could put further pressure on regulators by delaying confirmations for key SEC and CFTC positions.

In the first half of 2027, digital asset headlines may therefore center on investigations into WLF associates and subpoenas for the SEC chair, with legislative progress receiving less attention.

2.2. Moderates Support Clear Rules, With Conditions

Moderate Democrats generally support digital asset legislation but also want stronger consumer protections and conflict-of-interest restrictions for public officials. If the CLARITY Act returns to a Democratic-led Congress, their demands could determine its final form.

Representative Ro Khanna has long supported clear rules for digital assets. In 2022, he co-sponsored the Digital Commodity Exchange Act, which emphasized consumer protection and transparency. In 2025, he said Congress could pass both stablecoin legislation and the CLARITY Act that year. At the same event, however, he argued that elected officials should not hold memecoins.

Khanna has also been discussed as a potential 2028 presidential candidate, giving him further reason to emphasize conflicts of interest involving public officials.

Senator-elect Roy Cooper, a former North Carolina governor, has no federal voting record. During the campaign, however, he met with industry representatives and said the industry wanted to comply with the law. Businesses, he argued, simply wanted to know the rules and be confident that those rules would not constantly change. His position combines support for regulatory stability with an emphasis on consumer protection.

As these lawmakers enter negotiations, they are likely to seek changes to the existing bills.

Moderates may make their support conditional on provisions preventing public officials from using digital assets for personal gain. Khanna’s Ban Crypto Corruption legislation is one example. He has also launched an inquiry seeking records on WLF’s dealings with the United Arab Emirates.

Lawmakers such as Cooper are likely to press for additional safeguards against illicit finance and stronger protections for consumers. But provisions aimed at the president’s family could prompt Trump to veto the legislation.

The CLARITY Act could consequently remain stalled as lawmakers negotiate between the current text and the changes Democratic moderates want.

2.3. Pro-Crypto Democrats

This group includes lawmakers who voted for the CLARITY Act and the GENIUS Act in the House, as well as those who campaigned on establishing clear rules for digital assets. They offer the industry potential allies in a Democratic-led Congress, although they are not yet positioned to lead the relevant committees.

Representative Ritchie Torres has been one of the Democratic Party’s most active advocates for digital asset legislation. He co-sponsored the CLARITY Act and the Blockchain Regulatory Certainty Act, led a letter urging fellow Democrats to support the CLARITY Act ahead of the 2025 House vote, and voted for the GENIUS Act.

At an SEC oversight hearing in February 2026, Torres said he had long believed in emerging technologies such as digital assets and blockchain. His support nevertheless has limits. After suspicious Polymarket trades betting on President Maduro’s removal came to light in January, he introduced legislation with 30 other lawmakers to prohibit public officials from using nonpublic information to trade on prediction markets.

Senator-elect Chris Pappas voted for both the CLARITY Act and the GENIUS Act while serving in the House. After the votes, he argued that U.S. leadership in innovation required embracing new technologies and establishing clear rules and safeguards for digital assets. He described the bills as a starting point for protecting consumers and supporting small business growth.

At the same time, Pappas expressed deep concern about President Trump’s disregard for established ethical standards and legal requirements, calling for stronger anti-corruption rules for public officials. In May 2026, he also called for a House investigation into corruption and insider trading on prediction markets.

These lawmakers are likely to seek conflict-of-interest provisions in the CLARITY Act to attract support from other Democrats.

Both Torres and Pappas have supported the bill while arguing that public officials must be prevented from exploiting their positions for personal gain. Concerns about the Trump family’s digital asset businesses were a major obstacle in September’s Senate vote, when no Democrat voted in favor. Addressing those concerns would remove one of the party’s main reasons for opposing the legislation.

Their ability to lead the process remains limited, however. Industry critics are likely to control the key committees, while provisions targeting the president’s family could meet resistance from the White House. For the industry, much will depend over the next two years on whether pro-crypto Democrats can use ethics provisions to build a compromise acceptable to both sides.

3. Elected Republicans: The Same Agenda, Less Control

Republicans elected to Congress continue to support private stablecoins as a means of preserving the dollar’s global dominance. They also oppose a government-issued central bank digital currency, or CBDC.

Their influence has weakened, however, following the defeat of several industry-friendly Republicans, including Senator Jon Husted and Representative Bryan Steil, who chairs the House digital assets subcommittee.

3.1. The Lawmakers Behind the GENIUS Act and the CLARITY Act

Senator Bill Hagerty and Representative Glenn Thompson, both reelected, helped write the frameworks behind stablecoin legislation and the CLARITY Act. With Republicans losing their majorities in both chambers, their priority will shift to preserving the legislative gains they have already made.

Republican lawmakers will now spend more of their time defending existing policy.

They are likely to focus on protecting the GENIUS Act, using the Senate’s 60-vote threshold for overcoming filibusters and the threat of a Trump veto to block Democratic efforts to tighten regulation. They may also support the SEC and CFTC in developing rules under their existing authority, allowing policy work to continue without new legislation.

3.2. Firm Opponents of a CBDC

Opposition to a CBDC is one of the clearest points of agreement among elected Republicans. They see digital asset policy as a way to develop the industry while limiting government surveillance of financial activity.

These lawmakers support private sector digital assets but firmly oppose a digital dollar issued directly by the government. They view a CBDC as a potential tool for monitoring individual transactions and favor private stablecoins as an alternative.

Their goal is to prohibit a CBDC by statute. With Democrats controlling Congress, that route is effectively closed for the next two years.

President Trump’s January 2025 executive order remains the principal explicit federal prohibition on a U.S. CBDC. Because a future president could reverse the order, Republican lawmakers have sought to put the ban into law. Representative Tom Emmer’s Anti-CBDC Surveillance State Act passed the House in July 2025 but did not clear the Senate. Its prospects have weakened further under Democratic control of both chambers.

These lawmakers are therefore likely to focus on overseeing implementation of the GENIUS Act. For example, they may scrutinize whether Treasury’s implementing rules introduce mechanisms that would allow the government to monitor stablecoin transactions.

A CBDC is unlikely to be introduced during the remainder of Trump’s term, which runs through January 2029, as long as the executive order remains in place. Their attention is consequently likely to shift toward privacy protections for stablecoin users.

4. Democrats Now Set the Congressional Agenda

Democrats have secured majorities in both chambers. The remaining election results will determine the size of those majorities, but congressional control has already shifted.

Their current positions suggest that investigating the Trump family’s digital asset businesses will take priority over passing new legislation. Leading Democrats on the relevant committees identified these businesses as a top investigative priority before the election. As the majority party, they will have the authority to issue subpoenas.

Even if Democrats take up the CLARITY Act again, they are likely to demand stronger consumer protections and conflict-of-interest restrictions for public officials. Concerns about the Trump family’s digital asset businesses were a major obstacle in September’s Senate vote, when the bill received no Democratic support.

Republicans will focus on defending the GENIUS Act and blocking Democratic proposals to tighten regulation. Their minority status makes passing new laws difficult, but they retain substantial power to obstruct legislation. Most contested bills need 60 votes to overcome a Senate filibuster, and Trump can veto legislation that reaches his desk.

The CLARITY Act now faces a harder path to passage. Trump, who has been the main political force behind the administration’s crypto-friendly agenda, will also have less room to act. Republicans’ policy goals remain largely unchanged, but progress is likely to slow.

To assess the direction and pace of regulation, the industry will need to watch how leading Democrats pursue the Trump family’s digital asset interests and how the White House responds.

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Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

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Key Takeaways

• JPMorgan is the world's largest dollar-clearing bank, handling $12 trillion a day, and its blockchain unit Kinexys is building products to process these payments around the clock.

• The Blockchain Deposit Account (BDA), which lets corporates move funds at any hour, is its main product, with estimated daily volume of about $3.5 billion, or roughly 0.03% of JPMorgan's total payments, assuming BDAs still account for half of Kinexys's total volume.

• JPM Coin, which turns deposits into tokens, has recorded only 48 transfers on Base since its first issuance, and the intraday repo service, which lends funds for a matter of hours, has not disclosed figures since 2022.

• JLTXX, a tokenized fund, by contrast reached $800 million in net assets within two months of launch, most likely because stablecoin issuers placed their reserves in it.

• The results are still small, but JPMorgan is gradually expanding its blockchain business on the foundation of the payments clients and deposits it already has.

1. Kinexys: The Blockchain Unit of a Bank That Settles $12 Trillion a Day

JPMorgan is the world's largest dollar-clearing bank, processing roughly $12 trillion a day across 120 currencies. Its payments business posted record revenue of $19.3 billion in 2025 and, in the third quarter of 2026, generated the most revenue of any business within the Corporate & Investment Bank (CIB), firmly establishing it as one of the group's core sources of revenue.

JPMorgan has recently been moving its core payment rails onto blockchain to automate payment processing, run it around the clock, and improve efficiency, and Kinexys sits at the center of that shift.

Kinexys is both an internal business unit and a key platform. Its roots date back to a blockchain research group established in 2015, and it took its current name in November 2024.

Kinexys aims to build financial infrastructure that is "programmable, always on." Its goal extends beyond individual tokenization projects to infrastructure on which deposits and assets move on a single ledger around the clock and settle automatically according to preset conditions.

Kinexys brings together blockchain-based payments, asset tokenization, and services and capabilities developed through Liink and Kinexys Labs, across private and public blockchain networks.

2. BDA: Deposit Accounts That Settle 24/7

Kinexys's main service is the Blockchain Deposit Account (BDA). It is a deposit account on a blockchain operated by JPMorgan, designed so that corporates can move and settle funds 24 hours a day without being tied to banking hours.

This works because of how the ledger is structured. Transfers between BDAs only change balances within the same JPMorgan-operated ledger, so they settle immediately, including at night and on weekends, without waiting for banking hours. BDAs also support programmable payments that move funds automatically once set conditions are met, as well as on-chain FX.

Payments company EBANX is a leading example.

Using Kinexys BDAs, EBANX reduced the time needed to transfer funds between its accounts across roughly 20 countries from more than a day, caused by country-specific processing times and intermediary steps, to a few minutes.

Because settlement happens in real time within JPMorgan's ledger, EBANX can confirm receipt regardless of time zone, which has allowed it to reduce the buffer funds it holds in each account.

According to a 2025 report Kinexys published with the MIT Digital Currency Initiative, BDAs processed more than $1 billion a day. Kinexys's total daily volume at the time was over $2 billion, meaning BDAs alone accounted for half of its transaction volume and were a major contributor to its activity.

JPMorgan has not disclosed BDA figures separately since then, but Kinexys's total volume has grown steadily. Average daily volume rose from more than $5 billion in 2025 to roughly $7 billion in July 2026. Assuming BDAs still account for about half of the total, as they did in January 2025, current BDA daily volume can be estimated at about $3.5 billion.

Even including repo, these figures remain small relative to JPMorgan's overall payments volume. Kinexys's total daily volume of $7 billion is about 0.06% of the payments business's daily volume (roughly $12 trillion), and the BDA estimate of about $3.5 billion is about 0.03%.

BDA is a commercial service through which real corporate funds already move. Compared with JPMorgan's overall payments volume, however, it is still at an early stage, used mainly by a limited number of companies to move funds between their own entities. Its volume continues to grow, which indicates that the service is proving useful.

3. JPM Coin (JPMD): Deposits Moving onto Public Chains

JPM Coin (JPMD) turns BDA deposits into tokens on public blockchains. The aim is to let deposits that were previously usable only among JPMorgan clients be used on blockchains outside the bank.

A company issues JPM Coin from its BDA balance, uses it to pay for transactions on Base or Ethereum, and can later redeem the tokens for funds credited to its BDA. Ownership is restricted, however, since only wallets approved by JPMorgan can hold the token.

JPMorgan's goal is to settle public-chain transactions directly in bank deposits.

Until now, institutions that wanted to pay in dollars on public chains have mostly had to use stablecoins. B2C2, which took part in testing at launch, expected JPM Coin to provide "real-time, onchain settlement with the assurance of a regulated USD deposit" for the same reason. JPMorgan has not, however, quantified the resulting cost savings.

On-chain data shows the following issuance and usage of JPMD by chain.

• Base: Since the first issuance in June 2025, there have been only 48 transfers, and none at all since February 20, 2026. Outstanding supply as of November 3 is about $1 million, roughly 0.02% of USDC supply on the same chain (about $4.3 billion).

• Ethereum: No tokens have been issued on the Ethereum version launched later, and no clients beyond the initial testing participants have been identified as actual users.

Contrary to expectations, JPM Coin has seen almost no real use, despite being issued across 2025 and 2026. Given that BDA took about three years to establish real use cases, however, JPM Coin is still at a very early stage and could begin to see broader adoption in early 2027.

4. Digital Financing: Intraday Repo That Reduced One Institution's Borrowing Rate by 56%

Digital Financing is an intraday repo service that lets institutions borrow for a matter of hours against Treasuries.

Financial institutions such as banks and broker-dealers sometimes need funds for only a few hours during the day to meet payment obligations. Digital Financing lets them obtain short-term funding at a lower rate than a bank's intraday credit line.

The borrower sets aside Treasuries and the lender sets aside cash, both in tokenized form, and the two are exchanged simultaneously at the agreed time. Because maturity can be set to the minute, the borrower pays interest only for the time used, and the cash leg is funded through BDAs.

This has lowered borrowing costs. According to a JPMorgan case study, one global financial institution cut its borrowing rate by 56% by using Digital Financing instead of a bank intraday credit line.

The problem is that it is hard to verify whether the service is still used at that scale. In a 2022 report, JPMorgan stated that cumulative repo volume had exceeded $430 billion since the service launched in November 2020, but it has not published repo figures since.

Broadridge's DLR, a competing blockchain repo platform, averaged $359 billion in daily volume as of September 2026. Even measured against JPMorgan's 2022 figures, DLR's daily volume alone exceeds half of JPMorgan's cumulative volume at the time, a substantial gap in scale.

ICMA also named DLR and Kinexys as blockchain repo platforms that have reached commercial scale, while assessing that JPMorgan's impact on the overall market remains limited.

5. Tokenized Funds: $800 Million in Two Months, Aimed at Stablecoin Reserves

These tokenized funds represent shares in J.P. Morgan Asset Management's money market funds (MMFs) as tokens on public blockchains. They were created to bring institutional money held on public chains into JPMorgan funds.

Stablecoin issuers are the main institutions holding large sums on public chains. For every $1 of stablecoins issued, an issuer must hold $1 in safe assets such as Treasuries as reserves, and many place these reserves in MMFs to earn interest.

The problem is timing. Stablecoin holders can ask to redeem their coins for dollars on-chain even on a Saturday night, but ordinary MMF shares exist only as entries on the fund manager's books and cannot be sold or moved until business hours resume on Monday.

Tokenized funds leave this register in place and issue an equivalent number of tokens on the blockchain, with Kinexys keeping the register and the token supply in sync. Issuers can therefore hold reserves as MMF tokens and earn interest while still being able to move them on-chain immediately when needed, including at night and on weekends.

On-chain token transfers do not necessarily mean immediate cash redemption or an immediate transfer of legal ownership, however, since legal ownership of fund shares follows the fund's register of investors.

JLTXX, which JPMorgan launched in May 2026, also targets this demand and was designed for use by stablecoin issuers under the GENIUS Act. Its prospectus states that stablecoin issuers are expected to hold the fund's shares as part or all of their reserve assets.

JLTXX launched with $100 million from JPMorgan, and its net assets grew to $800 million by the end of July, two months later, according to SEC filings. As of November 3, on-chain supply across Ethereum and Solana totaled about 795 million tokens.

The buyers of JLTXX have not been named. SEC filings as of the end of September show that depository institutions such as banks hold about 84% of shares of record and non-financial companies hold about 16%. Taken together with the design purpose stated in the prospectus, this suggests the money most likely came from stablecoin issuers or the banks that hold their reserves.

JLTXX's rapid growth does not mean it is clearly ahead of the market. As of the end of September, JLTXX ($628.5 million) was similar in size to competitor Franklin Templeton's on-chain fund ($668 million) and still well behind BlackRock's BUIDL (about $2.08 billion), according to rwa.xyz.

The market JLTXX targets, however, is only beginning to grow.

U.S. Treasury Secretary Scott Bessent has projected that the stablecoin market, currently about $300 billion, could grow tenfold by 2030 under the GENIUS Act, and the amount issuers already place in MMFs is substantial. Circle, the issuer of USDC, held about $62.5 billion, roughly 84% of its reserves, in a single dedicated government MMF as of the end of September, about 80 times JLTXX's current size.

If JLTXX wins reserve mandates from issuers one at a time, it could grow to several dozen times its current size.

The stablecoin market, however, stood at about $295.5 billion in November, roughly where it was a year ago, so it remains to be seen when this projection will materialize.

6. Ten Years of Kinexys and the Next Ten: Lessons for Financial Institutions

JPMorgan has invested across the firm for more than a decade, starting with a blockchain research group in 2015 and moving through Onyx to today's Kinexys.

Backed by a firmwide technology budget of more than $15 billion a year, it has fully integrated blockchain into the core infrastructure of its payments business.

CEO Jamie Dimon openly acknowledged at Investor Day that "we spent too much on it," which shows that JPMorgan's commitment has gone well beyond basic R&D. This sustained commitment of resources and investment clearly distinguishes it from other financial institutions.

In 2026, JPMorgan has emphasized a new direction, stating that "we need to roll out our own blockchain technology" to compete with new blockchain competitors. It has also said that blockchain will eventually replace traditional financial infrastructure, and it is putting more weight behind practical service expansion through Kinexys, including crypto-collateralized lending and the launch of public on-chain MMFs.

Kinexys's decade offers clear strategic lessons for traditional financial institutions adapting to changes in financial infrastructure.

Rather than building a new chain without a clear purpose or launching standalone services with little substance, JPMorgan started from the strengths of its core business: its existing payments clients, for whom it processes $12 trillion a day, and its deposit ledger.

It first proved the efficiency of its internal infrastructure through BDA, including 24/7 real-time settlement and transfers between affiliated entities, and then expanded step by step into on-chain markets with products such as JLTXX.

Many financial institutions face pressure to deliver quick results. JPMorgan's blockchain business, however, has developed over more than a decade, building on its deposit ledger, liquidity, and existing payments clients. For institutions developing their own blockchain strategies, the lesson is to start with established strengths and expand through practical use cases.

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• Below the Surface: How Canton Network Is Reshaping Capital Market Infrastructure

• BlackRock BUIDL: $2.63B On-Chain Reserve Asset

Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

Terms of Usage

Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn’t harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research’s reports, it is mandatory to 1) clearly state ‘Tiger Research’ as the source, 2) include the Tiger Research logo. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.

Key Takeaways

• Binance estimates its losses from the hack at about $6.3 billion, making it the largest hack on record and more than four times the $1.46 billion stolen from Bybit.

• The attacker entered Binance's internal systems through an employee's laptop and, instead of submitting a withdrawal request, obtained a signature on an EIP-7702 authorization that handed over control of the wallet. TraderTraitor, a North Korean hacking group that has relied mainly on social engineering, has been named as the likely perpetrator.

• FTX collapsed after misusing customer funds. Binance's losses resulted from an external hack, and the exchange has pledged to cover them with its own funds.

• The $3 billion that has been frozen has not yet been returned, however, and the SAFU fund can cover only 18% of the losses. Whether Binance has enough company funds to cover the remaining $5.1 billion or so has not been verified.

• Customer outflows once deposits and withdrawals resume, along with the stolen assets that have moved into DeFi, are the next risks to watch, and the impact is expected to spread beyond Binance to the broader DeFi market.

1. Scale of the Loss and Timeline

Binance, the world's largest crypto exchange, has been hacked. Blockchain researcher Spreek disclosed on X that assets in a Binance-linked wallet had been moved to new addresses, and Binance founder Changpeng Zhao later acknowledged the hack. All times below are KST.

• 05:24: 167,464 ETH and about 1.6 billion USDT are drained from the Binance hot wallet "Binance 14" in a single transaction

• 05:32: On-chain researcher Spreek is the first to flag the unusual transaction on X

• 06:15: Changpeng Zhao states that "Binance appears to have been hacked"

• 06:16: Binance issues its first official statement, saying it is "investigating a potential security issue"

• 06:18 to 06:25: Circle (800 million USDC) and Tether (1.57 billion USDT) freeze assets linked to the attacker

• 09:13: Binance suspends all deposits and withdrawals and says it will "cover all losses"

• 09:52: Binance confirms that $3 billion in stolen funds has been frozen

• 11:23: Binance publishes its initial findings: total losses of about $6.3 billion, caused by a compromised DevOps engineer's laptop

Binance estimates total losses at about $6.3 billion, more than four times the $1.46 billion stolen from Bybit in the previous largest hack.

2. How the Attack Worked

Binance has released only its initial findings and has not yet published a detailed post-mortem.

2.1. Forged Requests: The Common Thread in Recent Exchange Hacks

In recent large exchange hacks, attackers did not steal private keys. They targeted the signing system that uses those keys to sign transactions.

To send crypto assets out of an exchange, a transaction must be signed with the wallet's private key. Exchanges store these keys in signing systems rather than entrusting them to individual employees, and when a withdrawal request comes in, the system checks the recipient address, the amount, and other details before signing and sending the transaction.

Cold wallets (wallets that keep keys offline) and multisig wallets (which require several parties to sign) also go through this verification step before a signature is produced.

This verification step is what attackers target. After breaking into an employee's computer or an internal server, an attacker can submit a fake request that looks like a normal withdrawal directly to the signing system, or alter what an employee sees on the approval screen. This is a forged request. If the signing system accepts it as genuine, the attacker can send assets anywhere without ever holding the private key.

In recent cases, attackers have most often reached employees' devices through social engineering.

• Social engineering: an attack that exploits human error rather than technical flaws, for example by impersonating a recruiter or business counterparty to get a target to open a malicious file, or by tricking someone into approving a transaction on a fake screen

In earlier incidents, attackers also compromised employee devices at Bybit and DMM Bitcoin through social engineering.

• Bybit (social engineering, February 2025, $1.46 billion): The attackers infected a developer's computer at wallet provider Safe with malware and then falsified the signing screen. The signers believed they were approving a routine transfer, but the transaction in fact handed over control of the cold wallet. (Sygnia, Safe post-mortem)

• DMM Bitcoin (social engineering, May 2024, $305 million): A North Korean hacking group posed as a recruiter to take over the account of an employee at the exchange's wallet software provider, then swapped out a legitimate withdrawal request in transit. (Japan's National Police Agency and FBI)

In both cases, the attackers first deceived a person to get inside and then used a forged request to deceive the signing system. However carefully keys are protected with cold wallets and multisig, one compromised employee and a signing system that cannot filter out forged requests are enough to cause a breach.

2.2. What Was Different at Binance

Binance also appears to have been breached through social engineering.

Binance has said only that an engineer's laptop was compromised and that the attacker reached its internal systems through it, without disclosing how the laptop was breached.

Chainalysis attributed the attack to TraderTraitor, a North Korean hacking group. It observed in real time that funds stolen from Binance were mixed on-chain with funds stolen in last month’s Bitget hack, which was also attributed to North Korea. It cited this connection as the strongest evidence linking the Binance attack to TraderTraitor.

What made the losses so large was an Ethereum feature called EIP-7702.

EIP-7702 lets a regular wallet sign an authorization allowing a designated program (a smart contract) to act on the wallet's behalf. It was introduced in May 2025 to make wallets easier to use, for example by bundling several transactions into one. Once a wallet signs such an authorization, however, that program can move all of the assets in the wallet.

The attacker exploited this. Once inside Binance's internal systems, the attacker submitted this authorization to the signing system instead of a withdrawal request. Because the authorization contains neither a recipient address nor an amount, it did not trigger the withdrawal checks, and once it was signed, control of the Binance hot wallet passed to a program the attacker had built.

Three minutes later, the attacker ran the program and drained 63 different tokens, including ETH and USDT, in a single transaction.

3. Will Binance Go the Way of FTX?

The question the market is most concerned about is whether Binance will collapse like FTX. The losses arose differently from those at FTX, but it is too early to say whether Binance can absorb them in full.

3.1. A Different Kind of Loss from FTX

The cause of the problem differs between Binance and FTX. FTX's problem was not a hack but the reckless use of customer funds.

When crypto prices collapsed after the Terra-Luna crash in May 2022, lenders to FTX's affiliate Alameda Research all demanded repayment at once, and about $8 billion in FTX customer deposits was sent to Alameda to repay them. When a report raising doubts about FTX's finances appeared that November, customers rushed to withdraw, but their money had already gone to Alameda. Unable to return customer funds, FTX went bankrupt.

Binance's loss, by contrast, came from assets stolen through a hack. Binance has said it will cover the loss with its emergency fund (SAFU) and its own corporate funds rather than customer money. The question is whether Binance has enough of its own funds to cover the loss.

3.2. Can Binance Absorb the Loss?

Binance estimates total losses at $6.3 billion, about 4.4% of the roughly $144 billion in assets it holds. Stablecoin issuers including Tether and Circle have frozen $3 billion of that amount, but a freeze only stops the attacker from using the funds and does not return them to Binance. The actual loss falls to about $3.3 billion (2.3% of assets) only once the frozen funds are recovered through law enforcement and issuer procedures.

Until the frozen assets are returned, Binance therefore has to cover the full $6.3 billion up front. The SAFU fund (about $1.16 billion) can cover only 18% of that, leaving roughly $5.1 billion to come from company funds. The difficulty is that Binance does not publish financial statements, so the size of its corporate funds cannot be verified.

A second problem comes after deposits and withdrawals reopen.

Covering the hack losses and withstanding a rush of withdrawals by anxious customers are separate problems. Within 24 hours of its hack, Bybit saw $4 billion, about 24% of its assets, leave the exchange. If Binance experienced a similar outflow of roughly 24% of its assets, withdrawals could reach about $35 billion, more than five times the $6.3 billion lost in the hack.

Binance therefore needs to set out how it will handle large-scale withdrawals before it resumes deposits and withdrawals.

The most important questions are how Binance will fund withdrawals until the frozen assets are returned, and when it will publish an updated proof of reserves. Without concrete plans by the time deposits and withdrawals reopen, customer anxiety could escalate into a large-scale bank run.

4. Cascading Bank Runs

A bank run at Binance is only the first-order problem, because in crypto a single asset is connected to many DeFi protocols.

For now, issuers can freeze only stablecoins, so the attacker converted the remaining assets into ETH and moved them into DeFi. For example, the attacker deposited stolen USDT on Aave and borrowed ETH against it. In response, Aave, the largest DeFi lending protocol, froze all of its markets to prevent further damage.

In other words, the damage may not stop at Binance and could spread to the DeFi protocols connected to it. The Kelp DAO hack in April, for example, caused $290 million in losses, but as fear spread, total deposits across DeFi fell by $13.2 billion over two days, 45 times the amount stolen.

A second-order bank run is therefore also possible. If the ETH and DeFi tokens held by the attacker are sold into the market, or if the Aave freeze drags on unresolved and deposits start to leave once withdrawals reopen, a first-order run on Binance could lead to a second-order run across DeFi markets.

In the end, Binance needs to present a concrete plan for covering the hack losses. As noted above, the amount may not be a critical problem for an exchange of Binance’s size, but no one can be certain, so its response will need to be watched closely.

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Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

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Key Takeaways

• The digital asset custody market has grown quickly over the past year, with the number of custodians licensed under MiCA in Europe rising more than fourfold, from 50 to 230.

• Custody earns fees in proportion to the value of the assets held, which limits its growth, and trust services, which allow a firm to manage and invest those assets, are emerging as the next stage.

• Historically, safe deposit companies expanded from safekeeping into estate administration and collateral management, and State Street later moved from custody into investment management. A similar pattern is now emerging in digital assets.

• Anchorage and BitGo are expanding into stablecoin issuance and settlement, while Agora and Catena are pursuing investment advisory and asset management, and all four are using, or seeking to use, national trust bank charters to expand their services.

• A custodian’s competitiveness is expected to depend less on the volume of assets it holds than on the additional services it can offer clients.

1. The Custody Industry’s Rapid Growth Over the Past Year

A year ago, Tiger Research’s report “The Custody Industry Growth You May Have Overlooked” argued that custody is a core foundation of the digital asset industry. At the time, however, custody services that hold and manage assets drew little attention.

Over the past year, the number of companies entering the crypto custody market has risen sharply. In Europe, custodians licensed under MiCA (Markets in Crypto-Assets Regulation), the EU’s comprehensive crypto framework, increased more than fourfold, from 50 to 230. Large global financial institutions are also joining, with Standard Chartered acquiring a specialist custody firm and Citigroup announcing plans to enter the market within the year.

This shift reflects the steady growth of on-chain assets. According to RWA.xyz, tokenized real-world assets (RWA) have grown 85% this year alone to about $39.8 billion. Stablecoins grew more than 50% in 2025 alone to pass $300 billion and have held around that level since. Because both tokenized assets and stablecoins require the underlying assets to be held in custody, custody demand has grown alongside them.

Companies are not entering the market for custody alone, however. Custody revenue comes mainly from fees proportional to the assets held, which limits growth. Companies are therefore using their existing custody relationships as a starting point to expand into trust services and improve profitability.

Companies are focusing on custody to capture rising custody demand in the near term and, over the longer term, to use it as a base for expanding into higher-value businesses such as trust services.

2. Custody and Trust Services: From Safekeeping to Asset Management

Custody and trust services are often confused. Both involve holding client assets, but the provider’s responsibilities differ.

Custody is a service that holds client assets on the client’s behalf. The client remains the owner, and the custodian’s role is limited to safekeeping. In a trust, by contrast, the client (the settlor) transfers assets to a trust company (the trustee), which then manages, invests, and disposes of them according to the purpose of the trust.

Any income from those assets goes to the person the client designates (the beneficiary). A trust company works much like someone entrusted with managing a family’s wealth, who invests it and distributes it to family members at set times. Because the trust company makes its own decisions about the assets, it has a legal duty to put the beneficiary’s interests first.

Both involve holding client assets, but custody focuses on safekeeping while trust services focus on management and investment.

3. A Repeating Cycle: From Safekeeping to Trust Services

Until now, most digital asset custody services have focused on holding assets securely. In the early market, custody demand came mainly from spot and futures trading, which required no complex management structure. As financial products based on real-world assets (RWA) have become more widely available, however, the need for trust functions that can carry out investment instructions and manage complex investment structures has grown quickly.

This shift closely mirrors the development of traditional finance. During the American Civil War in the 1860s, expanded government bond issuance sharply increased demand for secure storage of debt securities. Later, as pooled investment vehicles such as funds emerged, custody work grew into a specialized trust industry.

3.1. Safe Deposit Companies: From Safekeeping to Estate and Collateral Management

Safe deposit companies in Boston and Rochester are leading examples of firms that started in safekeeping and expanded into trust services. Both initially earned rent by leasing safe deposit boxes to customers. After adding trust services, they expanded into administering individuals’ estates and managing corporate bond collateral.

They were able to expand because their customers faced problems that safekeeping alone could not solve. Once they obtained the authority to provide trust services, the safe deposit companies could address these additional client needs.

For individual customers, the problem was inheritance. When a customer died, the securities in the box had to be sorted and distributed to heirs, but a company that only rented out boxes had no authority to do so. With trust powers, safe deposit companies could take responsibility for managing and distributing property after death.

A typical arrangement would invest the estate to pay the surviving spouse income for life and then pass the principal to the children after the spouse’s death.

For corporate customers, the problem was bond collateral management. When a company issued bonds to many investors, it needed a party to manage the collateral on behalf of the bondholders and enforce their rights in the event of default. Trust companies took on this work, which bondholders found difficult to handle individually.

In 1883, the Boston company became the trustee managing the collateral for American Rapid Telegraph’s $3 million bond issue, and when interest went unpaid, it filed to foreclose on the collateral on behalf of the bondholders.

These historical cases show that safe deposit companies grew by adding legal authority to a trusted safekeeping system and taking on work that customers found difficult to handle themselves.

Customers who trusted these firms to safeguard their assets were also willing to let them manage those assets. Trust powers gave the firms the legal authority to administer estates and manage collateral. The companies applied capabilities built through safekeeping to the next problem their customers faced.

Custodians can grow by addressing similar unmet client needs, which means looking not only at how much their assets under custody have grown, but also at what else the clients who own those assets need.

3.2. State Street: From Holding Fund Assets to Managing Them

State Street is an example of a firm that moved from holding fund assets to managing them directly. In 1924, it became the custodian bank for the first US mutual fund, and in 1978 it established an asset management unit for institutional investors. Having safeguarded assets managed by other firms, State Street began earning investment management fees of its own.

Handling both custody and asset management allowed the firm to offer clients more services. Clients could have their assets held and managed within the same group, and the firm could offer investment products to clients already using its custody services. The firm could grow by providing more services to existing clients, not only by finding new ones.

Its first asset management business also started with services that drew on its existing capabilities. State Street initially focused on index management and cash management. Index management in particular required the ability to buy assets in line with an index, process trades, and maintain holdings records, all work the firm had already been doing as a custodian bank.

The firm later broadened the client base for its products. In 1993, together with the American Stock Exchange, it launched SPY, the first US ETF, turning the index management it had offered to institutions into a product that individuals could easily buy and sell on an exchange. The business progressed from custody to asset management, and from asset management to product distribution.

State Street applied the experience it gained from handling trading, settlement, and recordkeeping for fund assets to index management, then launched an ETF that extended its client base to individual investors.

Digital asset custodians can likewise find their next business in the assets they hold and the clients they already serve, by looking at what clients want beyond safekeeping and adding first the services they are best placed to provide. Helping clients put those assets to use matters as much as growing assets under custody.

4. How Digital Asset Custodians Are Moving Into Trust Services

Digital asset custodians are moving beyond simple safekeeping and expanding into trust services. They are obtaining or applying for trust charters and broadening the services and products they offer clients.

Leading examples are Anchorage, BitGo, Agora, and Catena. Anchorage and BitGo are expanding into stablecoin issuance and settlement, while Agora and Catena are preparing to offer investment advisory and asset management. Their directions differ, but all four are looking for new revenue from the assets they hold.

4.1. Anchorage and BitGo: Adding Banking Services to Custody

Safe deposit companies once expanded from safekeeping into estate and collateral management. In digital assets, Anchorage Digital and BitGo are following the same path. Both started by holding digital assets for institutions and now provide the financial services clients need to put those assets to work.

Both are authorized to provide trust services as well as custody. Anchorage in January 2021 and BitGo in December 2025 converted from state-chartered trust companies into national trust banks supervised by the Office of the Comptroller of the Currency (OCC).

Since then, their business has broadened from institutional Bitcoin and Ethereum products to RWA and stablecoins. Through their trust banks and affiliates, they are adding trading, settlement, collateralized lending, and staking to custody. In stablecoins, they also act directly as issuers, handling issuance, redemption, and reserve management.

Their competitors are no longer limited to other custodians. They can also compete for institutional clients with traditional banks entering the digital asset business, because they already have a client base and experience processing digital asset transactions.

As the markets for institutional Bitcoin and Ethereum products, RWA, and stablecoins grow, so does their opportunity to provide more of the financial services traditionally offered by banks.

The two companies have grown large enough to compete with traditional banks for clients in digital assets.

Their competitive strengths are the institutional clients they have already secured and their experience handling digital asset financial operations. While traditional banks expand their digital asset businesses, the two companies can establish themselves early by handling trading, settlement, and financing for existing clients.

By the time banks enter this market, Anchorage and BitGo may already be established as major competitors.

Just as safe deposit companies grew into banks by way of trust services, the two companies are growing from custody specialists into firms that handle digital asset finance for institutions.

Firms that have grown through custody and trust services may eventually become global banks. If clients anywhere in the world can deposit digital assets with them and easily handle the financial services they need, these firms could be used much like a local bank.

4.2. Agora and Catena: From Holding Assets to Managing Them

State Street applied its experience holding fund assets to asset management and later broadened its client base through ETFs. Agora and Catena are likewise preparing to add investment advisory and asset management to custody, moving beyond holding client assets to advising on where and how to invest them.

On September 18, 2026, both received preliminary conditional approval from the OCC to establish national trust banks. They must still meet opening conditions, including capital and operational requirements, and obtain final approval before they can begin operations.

Their advisory and asset management businesses through trust banks are therefore still in preparation and not yet at a stage where revenue or performance can be assessed.

Once approved, Agora plans to recommend investment opportunities and sources of yield to institutional clients that hold assets with it, with final investment decisions left to the client. Catena plans to manage assets directly under terms agreed with clients, and also to manage assets that AI agents use on behalf of companies. Their approaches differ, but both aim to add investment advisory or asset management to custody.

Their early moves matter because, in digital asset management, understanding the market and building a strategy ahead of others is itself a source of competitive advantage.

In DeFi, earning yield by lending assets, providing liquidity, and combining multiple services works differently from traditional finance, so it takes time to learn where returns come from and what risks they carry. This is why even firms with extensive asset management experience in traditional finance would find it difficult to enter this market without first developing the necessary expertise.

If Agora and Catena analyze investment opportunities and prepare management strategies early, they may be able to stay ahead of financial institutions that enter later. Once they begin operations and build a track record in performance and risk management, that gap could widen.

If the two companies build digital asset management experience before traditional financial institutions do, they could use it to secure a clear lead in the market. If they then launch products that retail investors can easily access, they could grow large enough to rival traditional asset managers.

5. Custody Is Now the Baseline: Preparing for What Comes Next

Holding digital assets securely is a custodian’s core function. Custodians will increasingly compete on the services they offer beyond safekeeping. As DeFi and RWA markets grow, clients want to invest their assets, use them as collateral, and trade them.

Tokenized Treasury funds are one example. Investors can do more than hold the fund and earn yield: they can use it as collateral to borrow stablecoins and put those toward other investments, so a single asset serves several financial transactions. For financial firms, helping clients use existing products in more ways becomes as important as creating new ones.

This also gives custodians room to expand. For institutions to use digital assets for investment and trading, they need asset transfers, settlement, and collateral management in addition to secure safekeeping. A custodian that already holds the assets and can also handle this work can take on a larger role in its institutional clients’ financial transactions.

Trust services are one way to take on the management and investment of those assets. A trust company can manage, invest, and distribute assets in line with the client’s objectives and the terms of the trust.

By expanding services through trust banks and affiliates, as the companies above have done, a custodian could grow into a firm that offers some of the services traditionally provided by banks, securities firms, and asset managers.

Obtaining a charter alone will not grow the business, however. Custodians need to build the services clients need, manage assets securely, and earn trust through actual results. Custodians that build experience in digital asset management and trading first may also gain an edge over traditional financial institutions.

A year ago, the focus was on the growth of the custody industry itself. The question now is what the companies holding those assets can do next. The coming year may be when companies that have been preparing to offer trust services launch them and win clients. If custody is the baseline requirement, the services custodians build on top of it through trust charters will determine who leads in the next stage.

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• One Year Under the Trump Administration: Changes in the U.S. Crypto Industry

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Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

Terms of Usage

Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn’t harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research’s reports, it is mandatory to 1) clearly state ‘Tiger Research’ as the source, 2) include the Tiger Research logo. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.

Key Takeaways

• While financial institutions that waited for regulation to be finalized are only now weighing whether to enter, banks that structured their business early have secured corporate payment networks and opened a gap that later entrants will find hard to close. European banks that moved as soon as the rules were set already hold the lead in the market.

• Starting the review only after legislation passes is too late. Only banks that have settled on a model, whether issuing from the bank itself, issuing through a subsidiary, or providing infrastructure services, and have already costed the 30% segregated deposit requirement and the regulatory expenses at each stage can launch a service the day the law takes effect.

• Without a white paper verification process that carries legal liability for management, and without redemption and recovery plans in place, the launch date slips indefinitely even once licensing opens.

• On the day regulation takes effect, banks will not start from the same position. While a bank that waited for the final legislation is still beginning its paperwork, a bank that has completed its profitability analysis and partnerships with MiCA as the benchmark can start capturing transaction flows immediately. Regulation opens the door to every bank equally, but market share goes to those that finished preparing first.

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Why look to Europe

While the rest of the world is still weighing how to manage the risks of stablecoins, Europe settled the entry requirements, reserve management rules, and redemption obligations early through MiCA, the Markets in Crypto-Assets Regulation. Once the regime was clear, European banks entered the market without hesitation, and their experience has become the strongest real-world evidence available to regulators elsewhere that have yet to set clear guidelines.

Because moving only after regulation is complete is already too late, banks in countries whose stablecoin rules are still unsettled need to design their business models before those rules are in place.

A stablecoin business involves more than minting tokens and obtaining a license. Before the law is finalized, banks need to prepare for three core decisions.

• First, the business model: the bank has to decide whether to issue tokens directly or to provide related services, such as distribution and custody, for another issuer.

• Second, the reserve management framework: the bank has to determine how reserves will be segregated and invested to meet the legal requirements that apply to the issuing entity.

• Third, the redemption mechanism and customer protection: the bank has to work out how it will return principal promptly during a surge of redemption requests, and how it will structure its disclosures.

The reference point for all three decisions is MiCA’s rules on e-money tokens (EMTs), the category covering stablecoins pegged to a fiat currency.

This report analyzes how Europe regulates EMT issuance and related services, and sets out the practical preparations a bank facing a regulatory gap can start now. Each decision is covered in the same order: the core decision to make now, the relevant MiCA provisions, and what the bank can do in advance. Because MiCA defines the legal boundaries without deciding a bank’s business model or monetization strategy, the European precedent is used here to spell out the decisions that banks outside the EU need to make ahead of their own regulation.

1. The first decision: issue directly, or provide only the services needed

The business structure for issuance comes before the technology.

In the EU, only banks and electronic money institutions may issue EMTs. An electronic money institution (EMI) is a company that lets customers pay or send money using funds loaded into an e-wallet or similar account. Besides issuing directly, a bank can also set up a separate subsidiary, obtain an EMI license for it, and issue EMTs through that entity.

Both licenses permit stablecoin issuance, but the legal and capital requirements that come with them differ substantially. A bank therefore needs to settle the governance question first, choosing between issuance from the bank itself and issuance through a subsidiary according to its business objective: whether it wants to shield the parent bank from prudential risk, or to lead with the credibility of its traditional banking infrastructure.

Before issuance, a stablecoin also requires publication of a crypto-asset white paper, a disclosure document comparable to the one required for a financial product. Unless the white paper, covering the token’s legal structure, how the reserve assets are managed, and the risks to holders, is drafted and reviewed from both a financial and a legal standpoint first, even a well-built technical implementation will have to be substantially reworked at the commercialization stage.

A redemption process for returning customer funds, and a revenue model that can carry its cost, need to be in place first.

Under Article 49 of MiCA, an issuer must redeem an EMT at par value whenever the holder requests it. Redemption fees are prohibited as a rule, and the redemption conditions must be clearly set out in the white paper. This means the funds received at issuance cannot be treated as revenue, and the issuer has to be able to raise and pay out the necessary cash even when redemption requests arrive all at once.

A bank can earn revenue from stablecoin services without issuing a stablecoin of its own.

MiCA does not require a bank to issue its own stablecoin in order to run a stablecoin business. Under Article 60, a bank can provide services around tokens issued by other companies, including holding them in custody for customers, transferring them to other parties, and exchanging them for fiat currency, and it can charge fees for those services.

The permitted scope differs by type of institution, however. A bank can handle tokens issued by third parties after a prior notification under Article 60(1), whereas an EMI, even after notifying under Article 60(4), may only provide custody and transfer services for the EMTs it has issued itself. For an EMI to handle third-party tokens, it needs a separate authorization as a crypto-asset service provider (CASP), so a bank that wants to handle a range of tokens has to weigh the cost and benefit of acting through the parent bank against obtaining the additional authorization for a subsidiary.

Overlap with payments regulation also needs to be checked. Transferring tokens on a customer’s behalf can qualify both as a crypto-asset transfer service under MiCA and as a payment service under the revised Payment Services Directive (PSD2). A banking license does not exempt the bank from PSD2 requirements such as strong customer authentication (SCA) or liability for unauthorized or defective transactions, so consistency with the financial laws already in force needs to be reviewed in advance.

The fee structure and break-even point of transfer services need to be examined in advance.

Under MiCA, a provider of crypto-asset transfer services must specify in its client agreements the transfer method, the security arrangements, the fees, and the governing law, and must publish its pricing and fee policy on its website.

A bank therefore needs to test, from the planning stage, whether the fees it sets can cover its operating costs, because a per-transaction fee only yields a real margin after system operating costs, staff costs, and the compliance costs of SCA, fraud detection systems (FDS), and incident response have all been deducted.

Since redemption into fiat currency cannot carry a fee as a rule, the bank also has to separate, in both its accounting and its operations, the transfer services it can charge for from the redemption process it must provide free of charge, and calculate profitability on that basis.

2. The second decision: reserve management to match the issuer’s regulatory status

A bank needs to confirm which rules apply to the issuing entity before deciding how to manage customer funds.

Article 48 of MiCA treats EMTs as electronic money, and the Electronic Money Directive applies wherever MiCA has no specific provision. The applicable rules nonetheless differ depending on whether the actual issuer is a bank or an EMI: a bank issuing directly remains under banking regulation, while an EMI must meet separate requirements for safeguarding customer funds. A bank preparing the business thus has to decide at the outset which entity will issue, under which license, and which entity will carry the redemption liability to customers.

A bank needs to decide where customer funds go and in what proportions, and calculate viability from actual yields and management costs.

Under Article 54 of MiCA, an EMI that issues EMTs must deposit at least 30% of the funds it receives from customers in separate accounts at other banks. The remaining funds may only be invested in secure, low-risk, highly liquid assets denominated in the same currency. The 30% deposit requirement does not apply when a bank issues directly.

A bank issuing through an EMI subsidiary needs an allocation strategy, worked out in advance, that accounts for the 30% liquidity deposit, the yield on the safe assets, and the cost of maintaining the accounts. Even in a country where regulation is not yet complete, a bank can use MiCA’s 30% segregated deposit requirement as a benchmark to run viability scenarios for each issuing structure ahead of time.

Not every stablecoin faces the heaviest regulation, but costs need to be estimated stage by stage.

Under Article 56 of MiCA, the European Banking Authority (EBA) designates a stablecoin as a significant EMT only when it meets several demanding criteria at the same time, including thresholds for the number of holders, market capitalization, and transaction volume. Not every token on the market is subject to the highest tier of regulation from the outset.

Of the 45 EMTs notified in the EU, USDC is the only one that has met these criteria and been designated a significant EMT. The other 44 are issued and circulate normally under the general framework. A bank entering the market does not need to budget from day one for the compliance costs that apply to the largest stablecoins.

The regulatory burden does change sharply at the moment of designation, however. For an EMI subsidiary in particular, Article 58 raises the reserve and own-funds requirements substantially and adds direct supervision by the EBA.

The bank’s profit-and-loss scenarios therefore need to be staged, separating the minimum cost of initial entry from the additional capital it would have to raise if growth later pushed its token into the significant EMT category.

When choosing the issuing entity, a bank needs to account for the capital and risk management costs that follow designation as a significant EMT.

Under Article 58 of MiCA, an EMI issuing a significant EMT must hold own funds equal to 3% of its average reserve assets, must regularly test whether it could pay out under a surge of redemption requests, and must have its reserve assets independently audited every six months.

The additional obligations in Article 58(1) do not apply to a bank issuing directly, which remains under the traditional banking supervisory framework. An EMI, by contrast, may be required by its supervisor to meet some of the enhanced requirements even before its token is designated significant. For a bank considering issuance through an EMI subsidiary, this means deciding who will raise the additional capital and when, and building the staff and costs of risk management, audits, and integration with external custodians into its business plan.

3. The third decision: design redemption procedures and customer communications together

A bank needs to prepare the redemption procedure and the customer guidance together, so that a customer who requests redemption actually gets the money back.

Under Article 49 of MiCA, an EMT holder can demand redemption at par from the issuer at any time, separately from the option of selling the token on a CEX(Crypto-asset Exchange). The issuer must set out the redemption conditions clearly in the white paper and may not charge a redemption fee as a rule. The one exception is a liquidity fee charged in a crisis under the conditions and procedures laid down in the issuer’s recovery plan.

In practice, a bank needs to define the procedure and the responsible staff for every step, from the channel that receives a redemption request through customer verification and token retrieval to payment. The white paper, terms of service, and app screens also need to give consistent information on the issuer, the redemption channel, the payment method, processing times, and whom to contact in case of delay.

The white paper and service screens need to explain the product’s nature and the scope of protection consistently, so that customers do not mistake the stablecoin for a bank deposit.

Article 51 of MiCA requires the white paper to describe the issuer, the structure of the token, and the rights, obligations, and risks of holders. In particular, it must carry an explicit warning that EMTs are not covered by deposit guarantee schemes or investor compensation schemes. The issuer must also notify the white paper to its competent authority at least 20 working days before publication, so the drafting and review period has to be built into the launch schedule.

Product names and marketing copy also need to be checked so that they do not give the impression of deposit-like protection. Whenever the redemption procedure or payment terms change, the white paper and customer communications have to be revised together, so that what customers were told continues to match how the service actually operates.

A bank needs to decide who verifies and approves the white paper’s contents, and keep a record of the basis and review history for each statement.

Under Article 52 of MiCA, if a holder suffers a loss because the white paper is incomplete, unclear, or misleading, liability for damages falls not only on the issuer but also on the members of its management and supervisory bodies. This liability cannot be excluded or limited by contract or by terms and conditions.

A bank therefore needs an approval structure, set up in advance, that assigns responsibility for each section of the white paper and ensures its reliability: operations signs off on the redemption process, treasury on liquidity and reserve management, and legal on the entity carrying the redemption obligation and on legal risk. Each department’s review basis and approval records should be kept systematically, and an ongoing monitoring process should update the white paper’s wording whenever operating systems or contractual terms change.

A bank needs both a recovery plan for managing a crisis and a redemption plan for winding down the business.

Article 55 of MiCA requires every EMT issuer to maintain both a recovery plan and a redemption plan.

The recovery plan sets out how the issuer would raise liquidity and restore normal operations in a crisis such as a run of large-scale redemption requests. The redemption plan, by contrast, covers the orderly wind-down: when the supervisor concludes that the issuer can no longer operate normally, or when the business has to be closed, the reserve assets are liquidated promptly and the remaining funds are returned to customers on an equitable basis.

This means a bank needs more than a recovery manual covering emergency funding routes and decision-making. It also needs a prepared wind-down scenario for the worst case: one that can identify each customer’s share in real time, liquidate and distribute the assets, and carry out the required disclosures to customers.

What banks can prepare now, regardless of regulation

The sections above used MiCA to set out what a bank needs for issuing stablecoins, managing the funds behind it, and handling redemption. MiCA gives countries that are still drafting their rules a clear reference point, but the actual business will have to follow whatever final law each country adopts. That does not mean a bank has to sit idle until its domestic legislation is settled: there are clearly defined areas where a bank can assess viability and prepare before the law takes effect.

The first is a realistic comparison of costs and benefits against traditional finance.

The concrete benefit to customers and to the bank from adopting stablecoins need to be verified in numbers. That means calculating the fee savings and the reduction in settlement time compared with traditional SWIFT-based cross-border transfers, and checking whether a real margin remains for the bank after system build and operating costs are deducted. This work gives the business its first outline, including which customer segments to target, such as B2B trade settlement or small-value cross-border remittances.

The second is a feasibility review of the business model: solo issuance, joint issuance, or distribution.

The business model should be chosen according to expected profitability. A bank can issue on its own, act as an infrastructure provider distributing tokens already in circulation, or join other banks in setting up a joint issuer. In Europe, a group of financial institutions is pursuing joint issuance of euro stablecoins through the Qivalis consortium, an arrangement that spreads the cost of building the infrastructure and the redemption framework while letting each bank concentrate on developing the services at its own customer interface.

The third is validating real demand and securing the network early.

Rather than waiting for the law to be finalized, a bank can identify the pain points of customers with frequent cross-border payments, such as importers, exporters, and fintech companies. It can demonstrate the time and cost stablecoins would save them, and open partnership discussions early with the local banks and payment providers abroad that it would need.

When regulation is finalized, banks will not be starting from the same position. A bank that has prepared carefully against a clearly established framework such as MiCA, and has already validated customer demand and business viability, can move straight to execution. A bank that waited for the final rules will only then be starting its review of business models.

A completed regulatory framework can open the business to every bank, but it cannot give back the time, or the early market position, that the banks which prepared first have already secured. Instead of waiting passively for domestic regulation to be completed, a bank is better served by using international frameworks such as MiCA as a reference now, to confirm customer demand, test business viability, and build the partner infrastructure it will need.

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Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

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Key takeaways

• Distrust of market makers stems from price manipulation firms that presented themselves as market makers. Because there were no clear qualification requirements, the name was used freely.

• Legitimate market makers lower investors’ trading costs by narrowing spreads and standing ready as a counterparty at all times. Projects hand this work to independent market makers to avoid suspicion that they are intervening in their own token’s price.

• Crypto market makers do the same work as their counterparts in traditional finance, but they operate in a fragmented market where there is no framework for formal contracts with CEXs and where contracts with token issuers are not disclosed. Trading with one’s own capital is already legal; the regulatory gap lies in the contracts.

• The Digital Asset Basic Act is the first opportunity to put this solution into law. The bill as proposed allows market making commissioned by a CEX, but recognizes contracts commissioned by token issuers only for the first six months after listing. Issuer contracts, where most of the problems arise, also need to be brought within the framework.

1. Why Market Makers Came to Be Seen as Manipulators

Anyone who has traded in the crypto market will recognize a familiar pattern: a token’s price surges right after listing, then collapses, and the heavy trading volume disappears almost overnight. Crypto investors often point to market makers (MMs) as the force behind these swings.

This negative perception originated with price manipulation firms operating under the market maker label. Because of these firms, the term “market maker” in the crypto market came to mean a manipulation group, and investor losses from their activity have continued in markets worldwide.

In the US, the FBI charged firms that offered “manipulation as a service,” and in Korea, a group that inflated trading volume under the pretext of providing liquidity received prison sentences. These were illegal operators that offloaded token supply for a fee, however, not market makers performing the function the term describes.

Because there were no clear qualification requirements, the “market maker” name was used indiscriminately, and the credibility of the entire industry suffered as a result.

Manipulation of this kind damages trust in the market and has nothing to do with the actual role of a market maker, which is to supply liquidity.

2. Why Markets Need Market Makers

A market maker is a key market participant that supplies liquidity and keeps trading going by quoting buy and sell prices at the same time. To understand why market makers are needed, it helps to first set out what they do. In Korea, the term “liquidity provider (LP)” is also widely used alongside “market maker.”

In a broad sense, supplying liquidity is not limited to firms with a particular qualification. Any order that does not execute immediately and instead rests on the order book waiting for a counterparty, known as a maker order, gives other investors someone to trade with.

Anyone who places maker orders is therefore providing liquidity in the broad sense. High-frequency trading (HFT) firms such as Jump Trading, which fill order books by trading with their own capital, fall into this category.

Just as an airport currency exchange counter guarantees that travelers can exchange money at any time, a market with market makers allows buyers and sellers to trade without waiting for each other. Both investors and token issuers benefit.

2.1. What Investors Gain: Lower Trading Costs

Fees are not the only factor that determines an investor’s actual profit or loss. “Hidden costs” matter more: whether an order executes immediately at the desired price, whether large trades move the price, and whether prices differ across CEXs.

The work of a market maker comes down to meeting these three conditions. It places dense quotes on both the buy and sell sides, takes the other side of a trade when no other counterparty is present, and closes price gaps between CEXs. Investors can then trade at lower cost, when they want, and at similar prices across venues.

• Lower trading costs: narrower gap between buy and sell prices (the spread) and lower additional cost for large orders

• Trading on demand: a counterparty available at all times

• Smaller price gaps across CEXs: simultaneous quotes on multiple CEXs, with arbitrage bringing prices together

First, trading costs fall.

The gap between the buying price and the selling price, the spread, is itself a cost. If the price at which an investor can buy right now is KRW 1,010 and the price at which they can sell right now is KRW 990, buying and immediately selling loses 2%.

The loss grows with order size, because once the volume available at the best price is used up, the order moves to the next price level and then the one after, buying at progressively higher prices. When a market maker places dense quotes, the spread narrows and more volume sits at each price level, which reduces the loss an investor takes on each trade.

Second, investors can buy and sell when they want.

In investing, being able to enter and exit a position at the moment of one’s choosing matters. With a thinly traded token, a seller has to wait until a buyer appears, and the price keeps moving in the meantime.

A market maker keeps quotes on the book during normal conditions and acts as a counterparty. As a result, even when few people are trading, a seller can find someone to take the order immediately, and a buyer can buy without waiting.

2.2. What Token Issuers Gain

For a token issuer, listing is the beginning rather than the end. A token needs to keep trading after listing so that users and investors can come and go and the token can be valued fairly. A market maker maintains this market on the issuer’s behalf, and the issuer gains two things through it.

• Consistent trading: less sharp price movement in response to small orders

• No suspicion of price intervention: an independent market maker manages quotes, and the token issuer only lends tokens

First, the issuer gets a market in which its token trades consistently. A listed token is valued by the market every day. Users buy the token to use the service, and investors buy and sell it based on its prospects.

The token can be valued fairly only if these participants can enter and exit without difficulty. In a thinly traded token, even small orders move the price sharply, and this volatility increases uncertainty and damages the issuer’s reputation regardless of its actual performance.

Second, the issuer avoids suspicion of intervening in the price. When a token issuer buys and sells its own token directly, it easily draws suspicion that it is moving the price. Trading is therefore left to an independent market maker, and the issuer only lends out tokens. A legitimate contract also includes provisions that prohibit price manipulation.

In short, investors can execute trades when they need to while paying much less in trading costs, and token issuers can establish a trading environment in which their asset circulates steadily. The difference between the buy and sell prices that a market maker earns is effectively a fee for service paid by market participants who want to trade immediately.

As competition in the market gradually brings these costs down, the benefits extend to all participants.

3. How Crypto Market Makers Differ

What a crypto market maker does is no different from what a market maker in traditional finance does. The difference lies in the market where it operates and in the rules of the country that governs it. A stock market maker signs a formal contract with the exchange and works under an established regulatory framework.

In the crypto market, by contrast, there is not yet a framework governing contracts between market makers and CEXs or token issuers.

3.1. Who Can Act: Licensed Institutions vs. No Contract Requirements

In traditional finance, market making is a formal role clearly defined by law. Financial institutions that pass a review sign a formal contract with the exchange and, in return for submitting quotes as agreed, receive fee discounts.

The exchange publicly discloses which firm makes markets in which stocks, and long-standing law and case precedent have set clear standards for what counts as “legitimate market making.”

The crypto market is in a very different position. Market makers do the same work, but there is effectively no framework under which a market maker signs a formal contract with a CEX and exchanges obligations for compensation.

The two markets differ in two decisive ways.

• The first is the absence of rules on contracts. There is no set framework for what counts as legitimate market making, who can become a market maker under contract with a CEX, or what obligations it bears and what compensation it receives.

• The second is structural risk specific to the crypto market. Distorted arrangements are common, such as CEXs taking on the market maker role themselves or market makers signing undisclosed contracts directly with token issuers. Given these conditions, major financial regulators have focused on immediate problems rather than building an entirely new framework, for example by barring CEXs from also operating market makers and requiring that undisclosed contracts be made public.

The Korean market faces the same problem. CEXs are strictly prohibited from acting as market makers themselves, yet there are still no standards or formal procedures for judging what counts as legitimate market making.

One point should not be misunderstood. The gap in the rules concerns the formal contracts that market makers sign with CEXs or securities firms, and these contracts are also where a license is required. Placing quotes and trading with one’s own capital is already a legal activity, regardless of licensing. The EU’s MiCA likewise does not require a license for market making on a CEX with one’s own capital and applies requirements only when services are provided to clients.

3.2. Who Signs the Contract: Exchanges vs. CEXs and Token Issuers

The most visible difference between crypto market making and traditional finance is that commissioned contracts with token issuers are widespread.

Among these, the “proprietary trading model without a contract” is different in nature. The market maker signs no contract with anyone and receives no compensation. It trades with its own capital according to its own strategy, and liquidity arises as a result.

This corresponds to the broad sense of liquidity provision described earlier and is an already legal activity with no point of contact with licensing. The token loan model is also essentially the same as proprietary trading if the market maker makes its own trading decisions and bears the price risk, and the issuer does not direct individual trades.

Problems arise among issuer contracts that measure performance by trading volume. According to industry participants, these contracts differ from CEX-led contracts in matters such as the source of funds and who bears the risk, and they cover a wide range of terms, from spread settings to strategies around listing and token unlock dates.

Contract structures that use volume generation as the main performance metric, however, carry a high risk of inducing wash trading and other fictitious trades, and the fact that their terms are never disclosed is seen as a major limitation.

3.3. Where Trading Happens: A Single Market vs. Fragmented Markets

Stocks trade on one exchange during set hours, and the exchange and clearing house protect against sudden price moves and settlement risk. Crypto trades around the clock on CEXs around the world, and there are no mechanisms to provide that protection. Supplying liquidity across these fragmented markets is a source of risk for market makers.

First, the crypto market runs 24 hours a day, seven days a week, and is split across many CEXs worldwide, which frequently produces price imbalances. Market makers spread their assets across multiple CEXs to correct these imbalances, but when a network disruption such as a deposit or withdrawal suspension occurs, this function stops almost immediately.

Second, the tools available to hedge risk are very limited. Because there are no safeguards such as circuit breakers and high-leverage futures trading is widespread, market makers protect against price moves by taking futures positions that offset their spot holdings.

As the liquidation cascade of roughly $19 billion in a single day in October 2025 showed, when a CEX’s auto-deleveraging (ADL) system is triggered, even a market maker’s legitimate hedge positions can be forcibly closed. Having lost even this minimal protection, market makers pulled their quotes in haste, and the shock and disorder in the market grew sharply.

The most fundamental problem is a settlement structure without a central counterparty (CCP). Unlike the traditional financial system, in which trades and settlement are guaranteed, crypto market makers must deposit assets directly with each CEX in order to trade. As a result, when a CEX holding those deposits collapses, as FTX did in 2022, a market maker can lose its entire deposit with no recovery.

4. Five Limitations of the Market Maker Industry Today

The market maker role is essential for smooth trading. Left unchecked, however, indiscriminate market making activity can seriously damage market stability. It is time to diagnose the structural problems of the crypto market accurately and find practical solutions.

The five limitations examined in the following sections are not flaws in the market making function itself. They arise because there are no clear standards or surveillance systems to distinguish legitimate liquidity provision from illegal price manipulation. Crypto market making today needs proper standards to be established in the market.

4.1. Normal Risk Management Is Mistaken for Manipulation

To outside observers, a market maker’s normal risk management can easily look like market disruption or price manipulation. Industry practitioners identified four risk management practices that are most often misunderstood.

Without a definition of what is normal, these misunderstandings occur even in markets with established regulation.

The Korean stock market is a representative case. In 2021, the Financial Supervisory Service judged frequent quote modifications and cancellations by market makers at nine securities firms to be market disruption and notified them of KRW 48.7 billion (about $35 million) in fines, and market making stopped immediately.

About a year later, in July 2022, Korea’s Securities and Futures Commission cleared the firms, finding that modifications and cancellations were unavoidable for meeting obligations and managing risk, that their modification and cancellation rates (95.68% to 99.55%) were similar to those on the New York Stock Exchange (about 94.6%), and that no standards had been set in advance. The activity was not illegal, but the market operated without market makers for a year until that conclusion was reached.

In the crypto market, the lack of clear standards means that the same trades are argued in court to be liquidity provision by one side and price manipulation by the other. Even legitimate market makers cannot predict whether their trades will be found unlawful, and some leave the market as a result.

The solution is to establish standards for legitimate activity in advance. The test should be whether there was an intention to trade, not simply how often orders were cancelled. This matches the approach the US took after the 2010 Flash Crash, when it banned only quotes at extreme prices. Practitioners also treat the following as the key criteria: compliance with contracts and risk management rules, an actual reduction in price risk, and whether the activity was based on two-sided quotes without a directional aim.

• Was the activity carried out within a pre-agreed contract and internal risk management rules?

• Did the activity actually reduce the market maker’s price risk?

• Was it based on two-sided quotes, without the aim of pushing the price in one direction?

For example, if a market maker sells spot and buys the same quantity of futures during a sudden market move, it may look like aggressive selling from the outside, but it is a normal hedge that offsets the risk of the overall position.

Selling large amounts of spot without a hedge while spreading negative rumors, on the other hand, is difficult to describe as risk management. If regulators and CEXs publish these standards in advance, legitimate liquidity providers can operate without legal uncertainty, and illegal activity can be identified more clearly.

The problem created by the absence of standards does not end with legitimate firms falling under suspicion. It also makes it easier for firms that are not market makers to pose as market makers.

4.2. Volume Manipulators Operate Under the Market Maker Label

The previous section dealt with legitimate market makers falling under suspicion. The opposite problem also exists: firms that are not market makers presenting themselves as such. Many of the incidents the market remembers as “market maker misconduct” involved firms that borrowed the name to run an entirely different business.

Gotbit is a representative example. According to US prosecutors, from 2018 to 2024 Gotbit sold a service that inflated trading volume using software that repeatedly bought and sold between multiple accounts. The aim was to raise client tokens in crypto market cap rankings and get them listed on major CEXs. The founder pleaded guilty and was sentenced to eight months in prison, and the company forfeited about $23 million in crypto assets.

Practicing market makers noted that the business model of such firms was to create fake volume without taking on any price risk. In a market that looks only at volume, these firms can even appear to be performing well.

The standard for evaluating market makers therefore needs to shift from trading volume to whether trading is actually possible, because volume can be inflated at will through wash trading. Practicing market makers treat volume only as an outcome and instead look at the following:

• How deep is the order book within 1% to 2% of the current price?

• How far does the price move when a given amount is traded?

• How much of the time are buy and sell quotes posted at the same time?

However large volume appears, if the order book is thin and small orders move the price sharply, there is no real liquidity. The deciding question is whether outside participants can execute the size they want at a fair price. When CEXs and token issuers select market makers on the basis of these measures, firms whose only purpose is illegal price manipulation will gradually be pushed out of the market.

Registration or licensing can be required of firms that sign contracts with CEXs or token issuers and sell services under the market maker name. Firms like Gotbit, which took money from issuers to sell a service, can be screened out from the start if requirements are placed at the contract stage. There is no need to bring participants trading with their own capital under licensing.

As noted in Section 3, the EU’s MiCA takes the same approach and requires a license only for services provided to clients, not for market making on a CEX with one’s own capital.

4.3. Hidden Contracting Parties and Conflicted Arrangements

Even when a capable firm is selected, serious problems can arise if the structure of who contracted with whom is opaque. In the crypto market, the parties to contracts between token issuers and market makers are often not clearly disclosed. With the counterparties hidden, distorted arrangements can emerge, such as a single firm acting as agent for both sides of the same deal.

The MOVE case illustrates this. The Movement Foundation transferred 66 million tokens, 5% of supply, to Rentech, an intermediary that described itself as a subsidiary of Web3Port, and entrusted it with providing liquidity. It later emerged that Rentech appeared in the contract once as the foundation’s agent and once as Web3Port’s agent, meaning the same firm stood on both sides of the deal.

These tokens were sold into the market right after the December 2024 listing, when there were almost no buy orders. Binance removed the market maker and froze $38 million in proceeds, and Coinbase later suspended MOVE trading.

The foundation stated that the sales were made without its consent. The arrangement was called a liquidity provision contract, but what actually happened was not two-sided quoting but a one-sided disposal of the token issuer’s supply.

Legitimate market making therefore depends on fair contract terms and transparent contracting relationships.

On the substance of the terms, contracts of legitimate market makers rest on two firm principles: the market maker bears real price risk, and the token issuer does not intervene in the price.

Under a token loan arrangement, the market maker provides two-sided quotes using the borrowed tokens and its own funds. When the contract ends, it simply returns the same number of tokens and receives no instruction at any point to move the price in a particular direction. To ensure this, the contract must include the following:

• A ban on wash trading

• A ban on pushing the price in a particular direction

• A cap on the spread between buy and sell prices

• A minimum quote size

The same principles hold under a call option contract if the market maker sets its day-to-day quotes on its own and the token issuer only sets the option terms without directing individual trades.

The second requirement is making contracts visible. At a minimum, CEXs and regulators should be able to confirm which market makers are active, with what token amounts and on what terms, and whether any intermediary represents both sides at once.

This is the information Binance has required from issuers of listed tokens since March 2026. Going further, just as stock exchanges disclose the market maker for each stock, investors should also be able to see which market makers are active in a token.

4.4. Exchange and Market Maker Under One Roof

When a market maker is an affiliate of a CEX, the conflict of interest grows. When one company runs a CEX, custody, and proprietary trading together, the affiliated market maker can easily receive privileges that other users do not have.

FTX and Alameda Research are a representative case. Alameda acted as a major market maker on FTX and received credit lines and privileges unavailable to other users. US authorities found that FTX customer deposits flowed to Alameda and were used for investments and to cover losses. Both companies went bankrupt in 2022.

The problem was not the market maker status itself but the fact that the credit and discretion attached to that status were used without any oversight to misappropriate customer assets.

The solution, then, is not to ban affiliated market makers outright but to separate and monitor them. After the International Organization of Securities Commissions (IOSCO) named this conflict of interest a key issue in its 2023 recommendations, Hong Kong turned it into regulation. In February 2026, Hong Kong’s Securities and Futures Commission (SFC) allowed market making by CEX affiliates on three conditions:

• The market making unit must be functionally separated from the CEX.

• There must be clear operational boundaries between the two.

• Before market making begins, an assessment report from an independent professional firm must be submitted to the regulator.

This approach draws a clear line and monitors it so that preferential treatment and information sharing do not occur. If Korean CEXs come to conduct market making through affiliates or related companies, the same principles should apply from the outset.

4.5. Market Makers Without Obligations Leave First in a Crisis

Where the first four cases are limitations seen under normal conditions, the last is a problem that appears when the market falls sharply.

Most crypto market makers have no binding obligations they must meet in a falling market. When losses mount, withdrawing quotes is the rational response, and the resulting gaps in the order book cause the market to collapse rapidly.

The October 10, 2025 event discussed earlier is a representative case. As many crypto assets fell 40% to 70%, industry practitioners assessed the withdrawal of market maker quotes as a decisive factor.

Preventing withdrawal in a crisis requires clear performance obligations together with an appropriate incentive structure. Participants bound by enforceable rules did in fact behave very differently in a crisis.

According to interviews with practitioners, when one crypto asset fell sharply on negative macroeconomic news, its market maker temporarily widened the spread but kept its quotes on the book, preventing trading from breaking down. This difference came from contractual obligations and risk management guidelines.

The traditional stock market has put these mechanisms into regulation. The Korea Exchange (KRX) requires market makers to submit quotes for at least 80% of each day and 90% of each quarter for each designated stock, and pays incentives only to firms that meet these obligations. Firms that fall short receive penalty points, and above a certain level their commissioned contract is terminated and they are disqualified for one year.

A measure of whether obligations were met is also needed. Practicing market makers judge recovery after a market shock not by a price rebound but by whether trading has resumed functioning normally:

• Does the widened spread between buy and sell prices narrow again?

• Is the quote volume that was withdrawn being replenished?

• Are price differences between CEXs converging?

• How long does it take to return to normal?

If these measures are used as the standard for obligations and compensated accordingly, market makers will have more reason to stay in a crisis than to leave.

5. From Enforcement to Oversight

Distrust of market makers in Korea is not without basis. As Section 4 showed, however, tracing that basis reveals that the problem was not the market making function itself. It was a structure in which anyone could claim to be a market maker and no one had defined what normal activity looks like.

Korean law still leaves this structure in place, though it is important to identify precisely where the gap lies. Placing quotes while trading with one’s own capital is legal today, and the same applies to operating with borrowed tokens. Like any other trading, this activity is punishable if it amounts to price manipulation, but it is not a problem simply because it is proprietary trading. The gray zone lies outside it, in the contracts.

• There is no channel for formal contracts with CEXs. The current Virtual Asset User Protection Act prohibits price manipulation without providing an exception for market making. If a CEX signs a contract with a market maker that includes quoting obligations, trades made under that contract risk being treated as price manipulation.

• There is no license or registration system for contracted market makers.

• It is difficult for corporations to open accounts and trade on Korean KRW CEXs.

What sits outside the regulatory framework in Korea, then, is not liquidity provision itself but a channel for commissioning and overseeing it through formal contracts. Contracted market makers have no route to supervision within the framework, and only after-the-fact enforcement remains.

Major jurisdictions are already moving in this direction, raising rules on unfair trading to the level of traditional finance and creating a framework within which market participants can operate.

• EU: Price manipulation of crypto assets has been prohibited since December 30, 2024, when MiCA took full effect. Market making on a CEX with one’s own capital is not subject to licensing; licenses attach to the point where services are provided to clients. Large market makers such as Keyrock and Flowdesk obtained licenses in June 2026 in order to serve clients.

• Hong Kong: Judging that liquidity on CEXs was insufficient, the SFC allowed market making by CEX affiliates in February 2026, on the condition that the market making unit be separated from the CEX.

• Japan: In July 2026, Japan passed amendments bringing crypto assets under the Financial Instruments and Exchange Act and added a new ban on insider trading.

Although these jurisdictions started from different points, they are clearly heading toward the same goal: regulating unfair price manipulation as strictly as in traditional finance while formally recognizing legitimate liquidity providers within the regulatory framework.

The task for the Korean market is to find the same balance. Neither blanket distrust of market makers nor uncritical defense of them is a sound answer. The regulatory changes needed to address the structural limitations described above can be summarized as follows.

1. Put the standard for distinguishing normal activity from misconduct into law. The starting point can be the standards the industry already uses: whether the market maker bears price risk itself, whether there is no aim of pushing the price in one direction, and whether outside investors were actually able to buy and sell. Standards set in advance prevent normal risk management from being mistaken for price manipulation.

2. Define qualifications for market makers that sign contracts. Registration and licensing requirements should apply where a market maker signs a contract with a CEX or issuer and takes on obligations. Volume manipulators operating under the market maker label would then be screened out at the contract stage, while broad liquidity provision with one’s own capital would remain open as it is today.

3. Make contracts visible. At a minimum, CEXs and regulators should be able to see which market makers are active, with what token amounts and on what terms. Investors should also be able to see which market makers are active.

4. Prevent conflicts of interest. If market making is carried out within the same group as a CEX, the organizations should be separated and subject to external assessment, as in Hong Kong.

5. Pair obligations with compensation. Imposing quote maintenance obligations with matching compensation, as in the KRX market maker program, gives market makers a reason to stay in the market during a crisis.

Now is the right time to put this legal and regulatory framework in place.

• The Digital Asset Basic Act bill introduced in June 2025 includes a provision excluding market making commissioned by a CEX from the definition of price manipulation.

• In September 2026, the director-general in charge at the Financial Services Commission (FSC) said publicly that the FSC would review the need to introduce a market making framework.

• At the parliamentary audit in October, the FSC chairman said the bill’s content had already been prepared and was in final consultations. The government aims to enact it within the year.

The remaining question is no longer whether to allow market makers but on what standards to allow them. One point should not be missed here. The bill made public so far follows the stock market model, centered on market making commissioned by a CEX. Many of the problems discussed above, however, came from contracts with token issuers rather than with CEXs. If the bill does not address how token issuer contracts are treated, the largest blind spot outside the framework will remain.

Opening the market to corporations is also tied to this legislation. In February 2025, the FSC announced that it would allow about 3,500 listed companies and professional investors to trade crypto assets on a pilot basis. It has not yet finalized the guidelines, however, and is considering timing the announcement in connection with the Digital Asset Basic Act.

If market makers are not brought within the rules now, while the rules for a market that corporate funds will enter are being set, liquidity provision will remain outside the framework even after the market opens.

For the Korean crypto market to take in institutional capital properly, the view of market makers needs to change first. Enforcement alone cannot keep legitimate market makers in the market, nor can it screen out firms that merely borrow the name. The Digital Asset Basic Act is the first opportunity to move market makers from being a target of enforcement to being a subject of oversight.

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Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

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Key Takeaways

• Driven by real financial ‘skin in the game’, prediction markets dynamically update in real time to provide precise probability distributions that continuously match or exceed the accuracy of traditional polls, expert surveys, and economic forecasts.

• Prediction markets have evolved beyond sports and election forecasting into crucial macroeconomic and geopolitical data infrastructure, widely adopted by major financial media, central bank researchers, and institutional market platforms.

• To establish prediction market data as trusted decision-making infrastructure worldwide, platforms must deepen liquidity to resist manipulation, actively engage regulators to reframe markets as monitoring tools, and maintain open, transparent data backed by independent research.

1. From Betting to Valuable Data

The first report covered the definition of prediction markets and how they work, and the second report covered the major regulatory developments. The central point of both reports is that prediction markets serve as valuable data, not merely as a venue for betting.

Major financial media and market infrastructure providers have begun to adopt prediction market data, which shows the value of that data.

Google Finance, CNBC, CNN, and The Wall Street Journal (WSJ) have started displaying prediction market probabilities, and Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange, and Tradeweb, an electronic trading platform for bonds and other assets, now distribute prediction market data to institutional clients alongside their existing market data.

A Federal Reserve Board working paper has also described prediction market data as a benchmark for macroeconomic expectations, such as interest rate decisions, inflation, unemployment, and GDP growth.

A Federal Reserve Board economist and co-authors described the markets of Kalshi, a prediction market, as “a high-frequency, continuously updated, distributionally rich benchmark that is valuable to both researchers and policymakers” (Diercks, Katz and Wright, 2026). Prediction markets are thus starting to be seen as a data source rather than a betting site.

Industry has already recognized prediction market data as valuable and put it to use. This final report in the prediction market series examines the utility of that data through three questions:

1. How does a prediction market price become valuable data?

2. Where is prediction market data used?

3. Do today’s prediction markets produce that kind of data?

2. How Does a Prediction Market Price Become Valuable Data?

As covered in the first report, the core mechanism of a prediction market, the binary contract, normally pays out either $1 or $0 depending on whether a specific event occurs. For example, if a contract stating “It will rain tomorrow” trades at $0.62, market participants are estimating the probability of that event at 62%.

A prediction market price ($0.62) therefore works as an intuitive probability (62%) for a future event. Four structural characteristics explain why these prices count as valuable data that global financial institutions and media use in actual decisions, not as mere betting odds.

2.1. Credibility Through Skin in the Game

Some regard betting on prediction markets as plain gambling, but putting money at stake gives participants real ‘skin in the game.’

‘Skin in the game’ means bearing the risk and responsibility of one’s own decisions. Unlike an opinion that costs nothing to state, a wrong prediction costs participants their own money, so they build only carefully verified information and genuine beliefs into the price.

When many predictions with money at stake are aggregated, the prediction market price becomes highly reliable probability data, provided the market has sufficient liquidity.

2.2. Timeliness Through Continuous Real-Time Updates

Traditional polls and expert surveys provide only a snapshot from the time they were conducted, so they are slow to capture fast-moving changes. For example, if a sudden external economic shock or an emergency statement arrives today, ahead of a central bank rate decision due tomorrow, a poll finished several days ago or a monthly expert survey cannot reflect it at all.

Prediction market prices, by contrast, change the moment new information enters the market. Prices update continuously because participants readjust their positions whenever news, unexpected developments, or regulatory announcements arrive.

A prediction market price is therefore not a probability fixed in the past but timely data that reflects changes as they happen.

2.3. Probability Distributions Across Outcomes

Traditional indicators that center on a single average or peak value lose information because they compress many opinions into one number. For example, when forecasting a central bank rate cut, a typical expert survey shows only one average figure, such as a “0.25 percentage point cut,” and cannot show scenarios that depend on how committee members’ remarks shift.

Prediction markets, by contrast, produce a ‘probability distribution’ across every possible outcome. A probability distribution here shows the probability of every possible scenario together rather than a single outcome (for example, hold 20%, 0.25 percentage point cut 70%, 0.5 percentage point cut 10%). It is also a continuous time series.

This lets a prediction market measure not only the most likely central value but also tail risk, meaning outcomes that are unlikely but would have a very large impact if they occurred. Prediction markets therefore provide more than a single-point figure: their probability distributions support an overall assessment of future market volatility and potential risk.

2.4. Objectivity Through Verification After the Fact

Prediction market data earns trust in academia and global financial markets above all because its results can be fully verified after the fact.

Ordinary expert forecasts and surveys can also be checked for accuracy once the outcome is known, but the assessment usually leaves much room for interpretation, and institutions tend to cite only the track record that favors them. Prediction market data, by contrast, is recorded in full as a clear quantitative price (probability) and usually settles at 0 or 1 at expiry. Scoring is therefore mathematically exact and leaves no room for subjective interpretation.

Anyone can compare historical price data with actual outcomes transparently and without error. Because no one can manipulate this objective track record and it can be shown at any time, prediction market prices are more than subjective guesses: data professionals and institutions can rigorously judge their past accuracy, which gives the most reliable basis for adopting them as a core decision-making indicator.

3. Where Is Prediction Market Data Used?

Prediction market data has drawn public attention only recently, but its history goes back to the Iowa Electronic Markets (IEM) of the 1980s. For a long time its best-known use was forecasting elections, and its value has become more evident as prediction markets have recently been applied to a much wider range of areas.

3.1. Elections: Earlier and More Accurate Than Polls

The first case to show the potential of prediction markets was the Iowa Electronic Markets (IEM) described earlier. The IEM was compared against 964 poll results across five US presidential elections held from 1988 to 2004, and in 74% of cases it predicted the actual election result more accurately than the polls (Berg, Nelson and Rietz, 2008).

This advantage was not limited to the period just before elections. An analysis of the 1988 to 2000 presidential elections found that one week before the election, the IEM’s vote share forecast error (the gap from the actual vote share) averaged 1.5 percentage points, smaller than the 2.1 percentage point error of Gallup’s final poll, and even 150 days before the election the average error was only about 5 percentage points (Arrow et al., 2008).

The two figures cannot be compared directly, however. A poll is a current indicator that asks “if the vote were held today,” whereas a prediction market price is a forward-looking indicator of “the final result on election day.”

In fact, one study found that polls adjusted for the time remaining until the election were more accurate than prediction markets (Erikson and Wlezien, 2008). However, another analysis of the 2008 elections finds that when prediction market prices are corrected for their own known bias, they predict better than adjusted polls early in the campaign and in close races (Rothschild, 2009).

Prediction market prices are therefore more accurate than unadjusted polls and perform on par with highly calibrated polls. They also add value by providing forecasts that are updated every day from several months before an election.

3.2. Economy: Reading Macroeconomic Expectations in Real Time

For macroeconomic indicators such as interest rates, inflation, and employment, it is important to know accurately, before release, what the market expects.

Market expectations have traditionally been measured with expert surveys or the prices of traditional financial products. Surveys, however, are updated only every few weeks and so lack timeliness, while futures prices give a single figure, and option-implied distributions exist only for a few variables such as interest rates and headline inflation. Prediction markets, by contrast, produce a real-time probability distribution directly, through a price for each outcome.

This quantitative utility was already demonstrated between 2002 and 2005 in the economic derivatives market. An analysis of binary option trading data tied to the released values of indicators such as nonfarm payrolls, retail sales, and initial jobless claims found that market-implied forecasts were as accurate as, or more accurate than, the average expert survey, and the probability distributions implied by the market closely matched how often events actually occurred (Gürkaynak and Wolfers, 2006).

A recent Federal Reserve Board working paper (Diercks, Katz and Wright, 2026) evaluates prediction market forecasts against established benchmarks. The authors find that Kalshi’s median and mode forecasts for the federal funds rate had a perfect forecast record on the day before FOMC meetings and significantly outperformed fed funds futures at that horizon. Compared with the Bloomberg consensus, Kalshi forecasts were significantly more accurate for headline CPI inflation and statistically similar for core CPI inflation and unemployment. These findings suggest that prediction markets can improve on some benchmarks, while performing comparably to others.

The study also points to a broader range of practical applications beyond accuracy. Liquid derivatives-based indicators had not existed for key macro indicators such as GDP growth, core inflation, the unemployment rate, and nonfarm payrolls. Prediction markets remove this constraint by providing market-based expectations and detailed probability distributions in real time, which makes them a valuable benchmark for researchers and policymakers.

Prediction markets have been more accurate than traditional indicators for headline CPI and at least as accurate for interest rate decisions, and they also express macroeconomic expectations that traditional financial markets never covered as real-time probability distributions. This makes them a practical source of information.

3.3. Public Health: Flu Early Warning 2 to 4 Weeks Ahead

The US Centers for Disease Control and Prevention (CDC) publishes official flu statistics weekly, so there was a time lag in tracking how the flu was actually spreading.

To address this limitation, researchers at the University of Iowa ran a pilot prediction market for flu in which participating medical professionals traded. The market pooled the clinical information they provided voluntarily and predicted flu activity across Iowa two to four weeks in advance (Polgreen, Nelson, and Neumann, 2007).

Such forecasts may help inform treatment, prevention, and policy decisions. The case showed that prediction markets can support rapid response in public health. However, it was a pilot study confined to the state of Iowa.

3.4. Companies and Intelligence Agencies: Information That Bypasses Reporting Lines

In a typical company, negative news and uncertain outlooks tend to be diluted or played down as they move up the reporting chain. An internal prediction market, by contrast, has employees bet directly on whether internal matters such as revenue, new product launch dates, and hiring will succeed, and rewards correct predictions. This bypasses rigid reporting lines and quickly gathers candid frontline judgment and information into prices.

• HP: An internal sales prediction market traded by 20 to 26 active participants was more accurate than official management forecasts in 6 of the 8 comparable cases, and in all 8 it correctly identified the direction in which the official forecast was wrong (Chen and Plott, 2002).

• Intel: More than half of the 979 internal prediction markets operated from 2006 to 2013 were more accurate than the company’s official forecasts (Gillen, Plott and Shum, 2017).

• Ford: Based on trading in its internal features prediction market, the company said in 2011 that it had decided against including a Ford-branded bike carrier and an in-car vacuum in future models (Cowgill and Zitzewitz, 2015).

• Google: A senior executive told a company-wide meeting that a goal of filling a senior leadership role had been missed for six consecutive quarters and that the internal prediction market had seen this coming (Cowgill and Zitzewitz, 2015).

• Siemens: For a software project whose traditional project plan still showed the deadline as reachable, the internal prediction market warned of a delay of two to three weeks, and the project was in fact completed 13 days late (Ortner, 1998).

Prediction markets have also proved useful on national security and geopolitical questions. In a geopolitical forecasting tournament run by the US Intelligence Advanced Research Projects Activity (IARPA) from 2011 to 2015, researchers compared prediction markets with prediction polls (surveys of forecasters) over two seasons.

In forecasts of 261 events by more than 2,400 participants, prediction market prices were more accurate than the simple average of the poll responses in both seasons. They did not match team polls whose forecasts were weighted by past accuracy and statistically adjusted, but the result shows that prediction markets aggregate information well without further processing (Atanasov et al., 2017).

Inside companies, prediction markets have repeatedly been reported to capture information that official forecasts and reporting lines missed. In the intelligence tournament as well, prediction markets were more accurate than the simple average of poll responses. However, they did not match team polls whose forecasts were weighted by past accuracy, and some of the markets, such as those at HP and Siemens, had small trading populations of about 20 to 60 people, which is a limitation.

4. Do Today’s Prediction Markets Produce Valuable Data?

Do the prediction markets operating today also produce this kind of valuable data? To find out, we analyzed the market types and forecast accuracy using public API data from Limitless, an on-chain prediction market platform, as of October 2026.

4.1. Variety of Market Types

At the time of analysis, a total of 556 markets were open. Far from being limited to simple sports or entertainment events, they broadly cover policy and macroeconomic indicators as a whole, including interest rate decisions by major central banks, elections and geopolitical variables, and tech company IPOs and quarterly earnings.

Prediction markets, once confined to a few events, now cover macro indicators and policy variables across the board. This suggests that the utility verified in the earlier sections (accuracy, timeliness, and verifiability after the fact) is now extending beyond specific areas to the global economy and policy decisions generally.

Uncertainties and future volatility that traditional financial systems and polls struggled to capture are now quantified as reliable probability data, which market participants and policymakers can use as practical reference points for decisions.

4.2. Forecast Accuracy

To test how closely prices in these markets reflect the actual probability of events, we compared the price one day before the scheduled resolution time with the actual outcome in 2,681 resolved event markets from our collected sample (about 85% of them sports markets).

In 9 of the 10 price ranges, the gap between the actual outcome rate and the price was within 4 percentage points. For example, of 165 contracts priced at 70 to 80% one day before resolution, 74.5% actually came true, and of 113 contracts priced at 90% or above, 97.3% came true.

The only range with a notable error was 50 to 60% (actual occurrence rate of 48.8%), mainly because about a third of the contracts in this range, most of them sports markets, were still at their initial listing price of 50% one day before resolution.

Apart from these illiquid, less popular sports markets, prediction market prices reflect the actual probability of events with high precision.

4.3. Response to New Information

Timeliness is what supports this accuracy. To check whether prices reflect new information as soon as it arrives, we tracked the time series of prices on the Fed rate decision.

The Fed rate decision market adjusted its probabilities immediately whenever new economic data or policy variables were released. The probability of a rate hold, which stood at around 70% in mid-August, fell below 50% in late August and early September as major indicators were released,

dropped to about 20% right after the September 11 inflation data release, and then fell into the 10% range the day before the decision. The probability of a 0.25 percentage point increase, by contrast, rose to 86 to 89% on the day of the decision, almost the same as the roughly 90% probability implied by federal funds rate futures on CME FedWatch (Diercks, Katz and Wright, 2026; Daiwa Capital Markets, 2026). Limitless prices formed just before the decisions of other major central banks showed the same real-time responsiveness.

On-chain prediction market platforms operating today thus meet in practice the timeliness and accuracy that the earlier sections identified as core requirements of valuable data. These cases show that prediction market prices absorb incoming information in real time and continuously supply it as highly precise probability data.

5. Do Prediction Markets Deliver Real Utility?

As this report has shown, the essential value of prediction markets does not lie in speculative trading or profit. Long-accumulated academic research and the empirical analysis in this report show that prediction markets produce probability data whose accuracy and timeliness exceed or complement those of traditional surveys and expert forecasts in areas such as elections, macroeconomic indicators, and corporate outlooks. The move by global financial media and key market infrastructure to adopt prediction market data as a real-time indicator also rests on this practical utility.

In major Asian countries and elsewhere, prediction markets are still often viewed as gambling. This analysis shows, however, that prediction markets such as Limitless already list markets on major regional policy and economic issues, including the interest rate decisions of the Bank of Korea and the Bank of Japan, although trading in these markets is still thin.

For this data to become trusted decision-making infrastructure worldwide, including in Asia, three efforts are needed.

First, structural efforts are needed to reduce price distortion and eliminate market manipulation. Liquidity in markets for major macroeconomic and political events should be increased and the pool of healthy participants broadened, so that a small amount of capital or speculative actors cannot distort prices.

Second, active government relations (GR) and communication are needed to change policy perceptions of prediction markets. Policy authorities and regulators in major Asian countries should be engaged continuously, through a cooperative framework, so that they accept prediction markets not as targets of regulation or blocking but as a supplementary macroeconomic monitoring indicator that aggregates the collective knowledge of private participants.

Third, transparent data disclosure and an independent research community are needed. Accuracy metrics and time-series datasets should be published regularly and openly, and research by specialized analysts such as Limitless Research should be encouraged, so that research institutions, the media, and policy authorities can easily access the data and trust it on the basis of objective evidence.

Prediction market platforms are at a turning point, evolving from simple trading venues into next-generation data infrastructure. If real-time probability data that closely tracks policy and economic issues worldwide, including in Asia, can be supplied and verified transparently, it can serve as an objective and useful tool for decisions under future uncertainty.

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Disclaimer

This report was partially funded by Limitless. It was independently produced by our researchers using credible sources. The findings, recommendations, and opinions are based on information available at publication time and may change without notice. We disclaim liability for any losses from using this report or its contents and do not warrant its accuracy or completeness. The information may differ from others’ views. This report is for informational purposes only and is not legal, business, investment, or tax advice. References to securities or digital assets are for illustration only, not investment advice or offers. This material is not intended for investors.

Terms of Usage

Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn’t harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research’s reports, it is mandatory to 1) clearly state ‘Tiger Research’ as the source, 2) include the Tiger Research logo. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.

Key Takeaways

• The number of M&A deals held steady, but large acquisitions gave way to smaller deals that add specific capabilities, such as licenses, payments, and institutional trading.

• Established lead VCs lost influence over deal terms, while strategic investors became more active, including CEX-affiliated VCs seeking to grow their own CEX and blockchain ecosystems.

• Seed and other early-stage rounds contracted, while capital concentrated in Series A to C rounds of companies that had already proven their business through revenue and licenses.

• Venture equity investment declined, while financing based on cash flow, such as bond issuance, credit lines, and SPAC listings, expanded.

• Capital concentrated in areas connected to traditional finance and real-world use, such as payments, stablecoins, tokenized securities, and AI-related infrastructure, rather than in standalone blockchain ecosystems.

1. Opportunities Shift Toward Institutions as the Market Rebounds

Crypto market sentiment turned from fear to greed in Q3 2026.

Bitcoin, which had declined for two consecutive quarters in the first half, rose 43% in Q3, its strongest third quarter since 2017, and US spot bitcoin ETFs recorded $6.34 billion in net inflows. The Crypto Fear & Greed Index, which had stayed in extreme fear throughout the first half, entered greed territory on August 20 and remained there for most of September.

Disclosed deal values, however, show that the rebound did not translate into more investment in crypto companies.

The capital that returned with rising prices went into crypto assets directly, while corporate investment, which ties up capital for years, did not move with short-term sentiment. The following sections examine the main changes in Q3.

2. Five Key Shifts in Q3

1. M&A: From Expansion Deals to Capability Acquisitions

2. VC Market: Lead Investors Lose Ground as Strategic Capital Grows

3. Funding Stages: Early-Stage Caution and a Focus on Proven Businesses

4. Financing: Listings and Debt Expand Beyond Equity

5. Sectors: Capital Concentrates in Infrastructure Linked to Traditional Finance

2.1. M&A: From Expansion Deals to Capability Acquisitions

The number of M&A deals in Q3 matched the first-half pace, but deal size fell sharply.

M&A deals totaled 39 in Q1, 36 in Q2, and 37 in Q3, while deal size appears to have declined. Data from Architect Partners, an M&A advisory firm that tracks crypto deals independently, shows that crypto M&A deal count fell 7% quarter-on-quarter in Q3 while deal value fell 83%.

Deal size fell because the targets changed. In the first half, the market was driven by deals that bought entire companies to build new business lines, such as Mastercard’s $1.8 billion acquisition of BVNK. Q3 acquisitions instead filled gaps in the buyers’ existing businesses.

Circle agreed to acquire Tazapay, a Singapore-based cross-border payments company, MoonPay agreed to acquire North Capital, which holds US securities licenses, and BitGo acquired NYDIG’s institutional trading business.

Obtaining licenses and proving a capability in-house takes a long time, while an acquisition provides both immediately. With the industry’s operating structure still taking shape, that time saving has become a competitive advantage. The focus of M&A is moving quickly from expansion into new businesses toward acquisitions that add specific capabilities.

2.2. VC Market: Lead Investors Lose Ground as Strategic Capital Grows

The influence of the main lead investors declined noticeably. The five most active lead investors since 2024 (Polychain, Pantera Capital, Hack VC, Paradigm, and a16z) led an average of 2.0 deals per month in Q3, down from 3.7 in the first half.

These firms had directly led 50% to 75% of the deals they joined and set valuations for the market, and their control over rounds is now weakening.

YZi Labs (formerly Binance Labs), by contrast, joined 14 deals, nearly three times its first-half monthly pace, followed by Coinbase Ventures with 12.

CEX-affiliated VCs increased their participation because their investment objectives differ structurally. Financial VCs aim for capital gains from rising equity or asset values, while CEX-affiliated VCs gain additional benefits, such as higher trading volume and new users, when their portfolio projects settle on the firm’s own CEX or blockchain, such as BNB Chain or Base.

These firms therefore have a clear reason to keep investing even when prices and valuations are uncertain. As a result, Q3 rounds reflected the influence of strategic investors seeking to grow their own platforms more than that of financial investors who set prices.

The Q3 VC market shows a shift from financial investment aimed at high returns toward strategic investment that creates business and ecosystem synergies.

2.3. Funding Stages: Early-Stage Caution and a Focus on Proven Businesses

Investors were reluctant to take on unproven risk. Seed deals accounted for 15.0% of all deals, the lowest quarterly share since 2024, and the monthly number of seed deals fell 28%, more than twice the 13% decline in total deals.

Disclosed investment in Series A to C rounds rose 29% on a monthly basis, and Series C funding in Q3 alone exceeded the total for the entire first half.

Early-stage investing spreads capital across many small projects and relies on a few successes for high returns. For that model to work, later investors must keep buying equity or tokens at higher valuations.

With corporate investment more cautious across the board in Q3, expectations for such follow-on investment appear to have weakened. Investors instead concentrated capital in expansion rounds for companies whose businesses had already been proven through revenue and licenses.

Jeeves and EDX Markets, both of which raised Series C rounds in Q3, are payments and trading infrastructure companies, which reflects the same pattern. The market’s investment criteria are moving from token issuance schedules to evidence of a working business.

2.4. Financing: Listings and Debt Expand Beyond Equity

Large sums in Q3 also came from outside venture equity. Of the 13 deals worth $100 million or more, four involved a listing or debt.

Securitize listed on the New York Stock Exchange through a SPAC merger, and Ripple Prime issued $275 million in unsecured senior notes. On a monthly basis, venture and strategic equity investment fell 24%, while debt financing rose from $70 million to $190 million and listing proceeds rose from $80 million to $150 million.

Bonds and listings require either the ability to repay or a valuation from public markets. In the first half, debt financing came mainly from bitcoin treasury companies such as Metaplanet borrowing to buy bitcoin.

In Q3, businesses with cash flow, such as prime brokerage, remittance, and stablecoin lending, borrowed to grow their operations. The basis for repayment moved from the bitcoin price to business cash flow. Some companies can now raise capital as ordinary businesses do, without venture investment, which may narrow the role of VCs to the early stage.

2.5. Sectors: Capital Concentrates in Infrastructure Linked to Traditional Finance

By sector, Q3 capital went to areas that connect traditional finance with the crypto ecosystem rather than to new layer 1 and layer 2 protocols.

The infrastructure sector’s share of disclosed investment more than doubled from 8.1% in the first half to 18.2%. The increase came from AI-related deals rather than new blockchain mainnets, led by Ionic Digital, which moved its business into AI data centers, and Prime Intellect, an AI training infrastructure company.

About half of the capital classified as “other” went to tokenized securities infrastructure such as Securitize and Alpaca, and payments and stablecoins was the only sector whose share held steady.

Sectors with little connection to traditional finance, by contrast, attracted much less capital. A single deal, Polymarket at about $300 million, accounted for 91% of Q3 investment in prediction markets. DeFi investment fell 71% along with a lower deal count, leaving the sector with 3.0% of the total, and the largest DeFi deal was Cari Network, a deposit token network backed by US regional banks. Custody attracted no new investment, and activity was limited to consolidation among established firms, such as BitGo’s acquisition of NYDIG’s trading business.

In Q3, capital went only to established firms that already held licenses and regulatory approvals, or to projects connected to banks and other traditional financial institutions. Investment moved clearly away from projects building new crypto ecosystems and toward the distribution channels and infrastructure through which traditional financial capital enters the crypto market.

3. Implications for Each Market Participant

Despite the price rebound, capital flowing into crypto companies remained tight in Q3. Capital instead changed its targets: small acquisitions that add specific capabilities replaced large deals, and strategic investors seeking to grow their own platforms became more prominent than financial lead investors.

Capital also concentrated in companies that had proven their business through revenue and licenses rather than in early-stage projects. As the trend toward control and fundamentals described in the previous report continues, the following sections set out the main tasks for each group of market participants.

3.1. Crypto Companies and Founders

• Prepare for longer early-stage fundraising: Seed deal count fell faster than the market average in Q3. Before the next round, companies should recalculate their runway conservatively so that they can reach concrete milestones such as revenue, licenses, or major partnerships.

• Review the terms of strategic investment: Capital from CEX-affiliated VCs continues to flow in, but it may come with conditions such as commitments to a specific CEX or blockchain. Companies should check in advance whether these conditions could restrict future financial investment or a sale of the company.

• Build regulatory and licensing capabilities: Recent acquirers have focused on capabilities they can use immediately, such as securities licenses, payment networks, and trading infrastructure, rather than on whole companies. Companies considering a sale or partnership should define their core capabilities and how those fit a potential partner’s business.

• Use a wider range of financing: Companies with stable cash flow can consider traditional financing, such as bond issuance or credit lines, to limit equity dilution.

3.2. Traditional Financial Institutions and Corporations

• Enter the market through acquisitions: For new crypto businesses, acquiring a specialist company with licenses and operating experience can be more efficient than building infrastructure in-house. M&A focused on infrastructure, licenses, and trading capabilities continues to increase.

• Value deals on actual terms: Disclosed deal values alone do not show how the market values these businesses. Buyers should prioritize fit with their own business and work with specialist advisers to test whether a deal can create value beyond its price.

3.3. Investors and Retail Participants

• Read funding news with care: A VC funding announcement should not be read as an automatic buy signal. The large token sales and outsized trading gains of the past are harder to expect in the current market, and retail investors should recognize the limited upside of early-stage positions.

• Evaluate projects on fundamentals: Projects should be assessed on revenue structure, regulatory compliance, and links to traditional finance rather than on token issuance schedules or short-term news.

The crypto market is moving beyond short-term expectations toward demonstrating real value and practical use. Some investors may regret this change, but the market’s transition into an industry can be seen as a healthy development.

Market participants that recognize this structural change and strengthen their core competitiveness and risk management will be better prepared for the next phase of the market.

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Data and Methodology

• Data source: Data from January 2024 to September 2026 is based on the RootData API (3,515 funding rounds), dated by the RootData registration date. Ionic Digital and Gauntlet, which closed in June but were announced in July, are included in Q3. Of the 195 Q3 records in RootData, two that were not investments (a DEX launch partnership between Robinhood and dYdX Labs, and membership in an Ethereum institutional consortium) were excluded, leaving 193 deals for analysis.

• Amount basis: Amounts in this report are the sum of deals with disclosed amounts (112 of 193 deals in Q3, and 286 of 441 deals in the first half). Deals without disclosed amounts are not included, so actual deal volume is larger than the figures shown. A Raven round recorded in RootData at $90 million was excluded because the original source showed that figure to be a valuation rather than an investment amount.

• M&A amounts: Disclosed M&A amounts and M&A’s share of the decline (83%) are based only on deals with amounts recorded in RootData. Deals whose amounts were disclosed but not recorded in RootData, such as Circle and Tazapay ($400 million, per an SEC filing) and Mirae Asset and Korbit (about KRW 141.4 billion, or approximately $100 million), are noted separately in the text. The Q3 M&A comparison refers to quarterly data from Architect Partners.

• Financing types: M&A follows the RootData round type. Listing proceeds include IPOs, post-IPO financing, and the Securitize listing. Debt includes Debt Financing, the Ripple Prime notes, and the debt portion of the Félix Pago round. Token sales include OTC and Public Sale rounds. All remaining deals are classified as venture and strategic equity investment, which also includes purchases of existing shareholders’ stakes, such as Hana Financial Group and Samsung Securities buying stakes in Dunamu in the first half.

• First-half and Q3 comparison: Because the two periods differ in length (six months and three months), deal counts and amounts were converted to monthly averages for comparison. First-half figures were recalculated to reflect RootData’s subsequent data corrections (441 deals, previously 435).

• Funding stages: Figures by stage, such as Seed and Series A to C, include only deals with a stage recorded in RootData (143 of 193 deals in Q3). For example, Fasset’s Series C and Augustus’s Series B are excluded from stage figures because RootData does not record their stage.

• Sector classification: Each deal is assigned to a single sector based on RootData project tags, giving priority to sectors with more specific business models in the following order: prediction markets, CEX, custody, payments and stablecoins, DeFi, gaming, NFT, social and entertainment, and infrastructure. Large deals without tags were classified manually after reviewing the business, and deals that fit no sector were counted as other.

• Institutional participation deals: Deals in which at least one investor classified by RootData as a corporate or institutional entity participated. This is the same basis as “deals with traditional financial institution participation” in the previous report.

• Deals with direct participation by traditional financial institutions: Deals in which at least one bank, securities firm, asset manager, exchange operator, payment network, credit rating or data company, traditional market maker, or venture arm of one of these participated. Deals without investor information in RootData are not counted, so this share is a conservative figure. For example, Hana Financial Group and Samsung Securities’ acquisition of stakes in Dunamu in the first half and US regional banks’ investment in Cari Network in Q3 are excluded because investor information was not available. Investors identified by keyword were reviewed individually, and fintech companies such as PayPal, Stripe, Robinhood, and Nium were excluded from traditional financial institutions.

• Verification of key deals: Key Q3 deals named in the text were cross-checked against company press releases, filings, and major media reports. Deals at the agreement stage (S&P Global and OpenZeppelin, Nasdaq and LeveL Markets, and Circle and Tazapay) have not yet closed.

• Market indicators: Bitcoin prices and quarterly returns are based on Binance BTC/USDT daily closing prices (UTC). The Crypto Fear & Greed Index is from Alternative.me, and US spot bitcoin ETF net flows are from SoSoValue data as cited by Investing.com. The CLARITY Act vote and the SEC exemption are based on the US Senate vote record and reports of the SEC announcement.

About RootData

RootData is a Web3 asset data platform launched in early 2022 that provides a structured investment and fundraising database for crypto investors and founders. It currently handles more than 3.4 million search requests per month and is used by more than 2 million crypto users. RootData’s data and research are cited by major media outlets and institutions, including The Wall Street Journal, Cointelegraph, Binance Research, and The Block.

Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

Terms of Usage

Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn’t harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research’s reports, it is mandatory to 1) clearly state ‘Tiger Research’ as the source, 2) include the Tiger Research logo. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.

Key Takeaways

• The RWA market has grown rapidly. The question now is how tokenized products can be issued, sold, and repaid in practice.

• In the model examined here, an offshore vehicle issues a product backed by underlying assets, while a licensed Hong Kong intermediary sells it to overseas professional investors. Investors buy the issuer’s product, not the assets themselves.

• A successful sale does not ensure repayment. The issuer must have an enforceable right to the assets’ cash flows, and those funds must arrive in time to meet its obligations to investors.

• The test comes after the first issuance: can the same structure support another product? A lasting market needs a steady supply of assets and investors willing to return.

1. The RWA Market Has Grown. What Comes Next?

According to RWA.xyz, the RWA market grew from about $1.5 billion in August 2023 to about $38.86 billion on September 13, 2026, an increase of roughly 26 times. More types of assets are being tokenized, while governments are developing rules for their issuance and sale.

The growth is clear. The next question is how to turn an asset into a product that investors can actually buy and, ultimately, be repaid from.

2. Where Should Tokenization Take Place?

Jurisdictions are introducing rules for tokenized assets, but their requirements and pace differ. Where a product is issued can therefore affect how quickly it reaches the market.

Hong Kong offers an established security's framework, access to international investors, and experience with tokenized bond issuance, including government bonds. Its licensing and investor protection requirements give issuers and intermediaries a framework for bringing products to market.

Hong Kong has set out rules for the key stages of tokenization, from SFC licensing and VASP regulation to technical safeguards. This clarity helps firms plan issuances and gives institutional investors a framework for assessing their protections. It is one reason Hong Kong is attracting attention as a hub for RWA issuance and distribution.

How, then, can assets from another country reach overseas investors through Hong Kong? We examine the process using Korean assets as an example.

3. How the Korea–Hong Kong Structure Works

The structure diagram has two sides. Korea, where the underlying assets are sourced, is on the left. Hong Kong and the British Virgin Islands (BVI), where the product is issued and sold, are on the right.

The black arrows trace the product structure.

• Korean securities firm: Provides a channel for purchasing underlying assets, such as listed stocks, fund units, and notes.

• BVI special purpose vehicle (SPV): Purchases and holds those assets through a brokerage account with the Korean securities firm’s Hong Kong entity, then issues notes backed by them.

• Tokenization platform: Creates tokens representing the notes issued by the SPV and records their issuance and ownership.

• Distributors: Offer the product to overseas professional investors through licensed intermediaries and eligible trading venues.

The orange arrows trace the subscription funds.

Overseas professional investors subscribe using fiat currency or stablecoins. The funds reach the SPV through the intermediary. Where subscriptions are made in stablecoins, the SPV converts them into fiat currency through a CEX. The proceeds then pass through the Hong Kong entity to the Korean securities firm, which purchases the underlying assets.

Finloop, a Hong Kong financial technology company, calls this its dual-engine model. One side sources the assets; the other issues and distributes the product. Three features matter most.

• The source of assets can change. A securities firm in another country and its Hong Kong entity could take the place of the Korean firms. Hong Kong could then serve as a distribution channel for products backed by assets from several markets.

• The SPV sits at the center. It receives subscription funds, purchases or holds the assets, and issues the notes. Investors have a claim under the SPV’s product terms, so the SPV’s rights to the assets and its ability to pass on their returns are critical.

• The SPV connects blockchain payments with conventional finance. Investors may subscribe in stablecoins and hold tokenized notes, while the assets are purchased and held through brokerage and custody arrangements.

The structure succeeds only if those links hold. That requires a suitable underlying asset, a sound issuance structure, and a lawful route to investors.

3.1. Choosing the Underlying Asset

Before issuing a product, the SPV needs a clear legal right to receive the money generated by the underlying assets.

For government bonds or fund units, the question may be whether the SPV can purchase and own them directly. For export receivables or music royalties, the position is more complex. The right to collect future payments may need to be transferred to the SPV, or the asset holder may need a binding obligation to collect the money and remit it.

In either case, the contracts must establish who is entitled to the cash, who collects it, and how it reaches the SPV. Without a clear collection path, an asset cannot reliably support payments to investors.

3.2. What Does the Offshore Issuer Create?

In this model, tokenization centers on the SPV. Even after the underlying Korean asset has been selected, a separate entity is needed to issue the tokens and distribute the proceeds to overseas investors.

Finloop’s dual-engine model places that role with a special purpose vehicle (SPV) incorporated in the British Virgin Islands (BVI). The SPV is the link between holders of Korean assets and overseas investors.

The SPV issues tokenized notes or securities backed by rights to income from the Korean assets. Overseas investors therefore buy a financial product issued by the SPV, rather than the Korean government bonds or export receivables themselves. Under the product terms, the SPV pays investors their income and repays principal at maturity.

For the structure to work reliably, the SPV’s incoming cash must be timed to meet its payments to investors. The issuer first needs to establish when each underlying asset will pay: interest and principal on government bonds, fund distributions and redemption proceeds, or settlement payments on export receivables and royalties.

If investors are due to be repaid before the SPV collects those funds, the product could face a liquidity shortfall or delayed repayment.

Incorporating an SPV offshore does not automatically give it access to cash generated by Korean assets. The contracts must specify the SPV’s legal rights to the underlying assets, who collects the cash, and who is responsible for remitting it to the SPV. The tokenization platform, meanwhile, keeps a transparent record of the amount issued, token holdings, and tokens burned.

The central task at the offshore issuance stage is to ensure that the cash the SPV can actually collect is sufficient and arrives in time to meet the payment terms promised to investors.

3.3. How Widely Can the Product Circulate After Its Sale in Hong Kong?

Creating a product through an offshore SPV is only one step. To sell it to overseas investors, the issuer also needs a financial institution to handle its distribution. Finloop proposes using a licensed Hong Kong intermediary, which can review the product under Hong Kong securities rules, offer it to professional investors, and reach investors outside Hong Kong.

The intermediary reviews the terms and risks of the SPV’s product and confirms that each investor is eligible to buy it. If the offering is restricted to professional investors, token transfers must remain restricted after issuance. The product terms therefore limit transfers to buyers whose eligibility has been verified. This is how Finloop proposes to structure its private placement products; the restriction does not apply to every tokenized security in Hong Kong.

Finloop also proposes making products first sold in Hong Kong available through intermediaries and trading venues in other regions. An initial sale in Hong Kong, however, does not automatically permit sales or trading elsewhere. The rules of each market must be assessed separately. Investors who want to sell before maturity also need a willing buyer and a way to determine the price. Using the product as collateral requires an institution willing to accept it.

In this structure, Hong Kong provides the route for the initial sale and investor eligibility checks. Sales and trading in other regions, as well as use as collateral, each require separate arrangements.

4. Three Risks That Could Interrupt Payments from Korean Assets to Investors

A tokenized product may sell successfully in Hong Kong and still fail to pay investors as promised. The cash generated by the underlying assets must reach them through the offshore issuing vehicle (SPV). Three risks could disrupt that flow.

• Unclear rights and collection arrangements: For assets such as export receivables, the contracts must specify where the buyer pays and who is entitled to receive the money. Unless the collection obligations and settlement process are legally binding, payments from the assets may never reach the SPV.

• A gap between cash collection and repayment: If investors must be repaid before the underlying assets settle, the SPV may face a liquidity shortfall and delay repayment. When won-denominated assets back a dollar-denominated product, exchange rate movements and conversion costs can also reduce returns.

• Cross-border transfer and tax bottlenecks: A Hong Kong intermediary’s authorization to sell the product does not resolve how funds move from Korean asset holders to the offshore SPV or how payments are made to overseas investors. Those transfer and tax procedures must work in practice.

The model ultimately depends on whether cash from the Korean assets can pass through the SPV and reach overseas investors in full and on time, as the contracts promise.

5. The Second Issuance Matters More Than the First

Selling a product backed by Korean assets in Hong Kong once is only a starting point. The first issuance takes time: the parties must review the assets, finalize the contracts, and decide how the product will be sold.

If they have to repeat that work from scratch for every new product, the business will struggle to scale. From the second issuance onward, they need to be able to reuse the structure established for the first deal.

Dollar-settled export receivables offer a way to test whether that is possible. The issuer and intermediary could apply the debtor assessment criteria and product disclosure approach developed for the first deal to later receivables, reducing the work needed to design each product. Applying the same criteria does not, however, mean that every receivable carries the same risk.

To judge whether the model can support a lasting market, three developments matter:

• Does the time needed to review assets fall with each issuance?

• Do existing investors return for new products?

• Do asset holders have a reason to keep supplying assets?

As experience with export receivables grows, the model could extend to other Korean assets. Its success will depend on more than one completed issuance. Asset holders must continue to supply suitable assets, investors must be willing to reinvest, and intermediaries must see value in bringing new products to market.

🐯 More from Tiger Research

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• Take RWA Tokenization Offshore First

• 2026 Commodity Tokenization Market Analysis

• Can Tokenized Pre-IPO Stocks Break Barriers in the Private Equity Market?

Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

Terms of Usage

Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn’t harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research’s reports, it is mandatory to 1) clearly state ‘Tiger Research’ as the source, 2) include the Tiger Research logo. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.

Key Takeaways

• 82.9% of Korean crypto investors opposed the current plan or supported a further delay. However, 63.4% would accept taxation if the system were improved, showing greater concern about readiness than taxation itself.

• If the tax takes effect, 69.7% expect to reduce or stop investing, while 73.1% are likely to use Korean CEXs less. Trading volume at Korea’s three largest CEXs could fall 30.0%, from KRW 860 trillion to KRW 602 trillion.

• Lower trading volume could reduce the three CEXs’ combined revenue by 29.5%, from KRW 1.033 trillion to KRW 728.2 billion, weakening the broader domestic industry.

• Activity could shift to global CEXs, self-custody wallets, and DeFi. In 2025, CARF-excluded routes accounted for 59.1% to 76.6% of CEX outflows across Japan, the UK, the US, and Italy, highlighting persistent limits in transaction tracking.

1. Why Crypto Taxation Needs a Second Look

South Korea is set to introduce a tax on crypto asset income in January 2027 after three delays. With just over three months remaining, public attention is growing. A related petition to the National Assembly has already received support from more than 50,000 people. As the debate gains momentum again, the discussion should go beyond simple support or opposition. It should also examine whether the current tax plan reflects how crypto is actually traded.

The principle of taxing gains from crypto investments is separate from whether the current tax plan can be implemented as it stands. Crypto assets move across domestic exchanges, global exchanges, personal wallets, and DEXs. Investors also frequently exchange one crypto asset for another. For the tax system to work properly, it must connect fragmented transaction records and calculate acquisition costs and actual gains and losses under consistent rules.

The problem is that if these systems are not fully in place, both investors and tax authorities may bear the burden. Investors may have to verify and prove their own transaction histories and acquisition costs. Tax authorities may also struggle to identify taxable income and the tax base accurately. The key question is therefore not only whether to introduce the tax. It is also whether investors can calculate gains and losses, file their taxes, and track transaction records properly under real-world trading conditions.

For these reasons, the current debate should not stop at whether people support or oppose the tax. It should also examine how well the current plan reflects actual trading conditions, what concerns investors have, and how the tax could affect trading behavior and the domestic market.

2. What Korean Investors Think About Crypto Taxation

Tiger Research surveyed 2,423 Korean crypto investors about their views on crypto taxation. Tiger Research led the survey, and PMI, a Korean polling firm, conducted it. The survey covered not only support for the tax and its timing, but also the adequacy of the current tax plan, the readiness of the reporting and payment system, and how investors expect their trading behavior to change after implementation.

Opposition to crypto taxation appeared across all age groups. Overall, 73.7% of respondents opposed the tax. Opposition exceeded 75% among respondents in their 20s, 30s, and 40s. Among those in their 50s and those aged 60 or older, 61.5% and 63.9% opposed the tax, respectively. Opposition was strongest among respondents in their 20s to 40s, but negative views were not limited to younger investors.

Support or opposition alone did not fully explain investors’ views. Among respondents who opposed the tax, 51.5% said they could accept it if the problems with the current plan were adequately addressed. At the same time, 74.5% of those who agreed that crypto should be taxed said the current plan should be postponed or revised rather than implemented as it stands.

These results show that many investors distinguish between crypto taxation itself and the current tax plan. Some who opposed the tax said they could accept it if the system improved. At the same time, many who agreed that crypto should be taxed did not support implementing the current plan as it stands. The gap became even clearer when investors assessed the specific rules and how ready the system is.

3. Investors' Main Concerns with the Current Tax Plan

The detailed survey responses show why investors viewed crypto taxation and the current tax plan differently. Their concerns centered on three areas:

• Whether the tax rate and deduction are appropriate and fair compared with other financial assets

• Whether the system properly accounts for losses and acquisition costs when calculating taxable gains

• Whether the system is ready to support tax filing and payment, track transactions, and protect investors

Investors looked beyond whether crypto should be taxed. They also considered how much they would pay, how the system would calculate taxable gains, and whether it was ready for implementation. The following sections examine these three issues.

3.1. Is the Tax Burden Fair?

Most respondents were critical of the tax burden under the current plan. Among all respondents, 73.5% said the 22% tax rate was too high. Another 65.2% said the annual basic deduction of about $1.8K was too low. In addition, 72.1% said the tax rules for crypto were unfair compared with those for other financial assets.

Lower-income investors also expressed strong concerns. Investors earning less than about $2.1K per month accounted for 24.9% of all respondents. Among this group, 87.9% opposed implementing the current plan as scheduled or called for another delay. This figure was higher than the 82.9% for all respondents. The results show that concerns about the current plan were not limited to higher-income investors.

Respondents also worried about the impact on younger people’s ability to build wealth. Overall, 73.0% agreed that crypto taxation could limit wealth-building opportunities for people in their 20s and 30s. Respondents in their 20s showed the highest level of concern at 78.7%. Those in their 30s followed at 77.2%. Support for this view also exceeded 65% in every other age group.

The survey shows that investors’ concerns went beyond the tax rate and deduction. They also questioned whether the rules were fair compared with those for other financial assets. Lower-income investors shared these concerns. Respondents across age groups also worried about the impact on younger investors. Investors considered both the size of the tax burden and how the rules would affect different groups.

3.2. Can Taxable Gains Be Calculated Accurately?

To calculate taxable gains accurately, the tax system must first determine how much an investor actually gained or lost. It also needs clear rules for losses, acquisition costs, and different types of crypto income. The survey found strong concerns in all three areas.

First, 65.9% of respondents said the current treatment of losses was inappropriate. Under the current rules, investors can offset crypto gains and losses within the same year. However, they cannot carry losses forward to offset gains in future years.

Crypto investors can experience gains and losses over several years. How the tax system treats those losses can therefore affect how accurately it calculates taxable income.

Respondents expressed even greater concern about acquisition costs and transaction records. Among respondents, 70.6% expressed concerns about the burden of calculating and reporting gains and losses based on their own transaction records and acquisition costs.

Crypto assets move across Korean and overseas CEXs and personal wallets. Investors also frequently exchange one crypto asset for another. As transaction paths become more complex, investors may find it harder to connect the original acquisition cost with later transactions.

Crypto income can also come from many different activities. These include trading, lending, staking, mining, airdrops, and liquidity provision. The current tax framework mainly covers income from transfers and lending. The rules therefore need to clarify which gains are taxable and when the tax applies. About 65% of respondents said the current framework does not adequately account for these different types of transactions.

The survey shows that investors were concerned about more than the tax rate. They also focused on how the system treats losses, determines acquisition costs, and classifies income from different transactions. These rules ultimately determine how the system calculates taxable income from an investor’s actual gains and losses.

3.3. Is the System Ready?

A tax system needs more than clear rules. It also needs the administrative and IT systems to put those rules into practice. In the survey, 66.4% of respondents said the government was not adequately prepared in these areas. Another 65.7% said it would be difficult to track and tax transactions accurately across Korean and overseas CEXs and personal wallets. In addition, 68.8% said investors would face a substantial burden when filing and paying the tax. Investors cared not only about the rules themselves, but also about whether the system could work in practice.

Crypto assets can move and trade outside Korean CEXs. When investors use global CEXs and personal wallets, transaction data can spread across multiple channels. This makes it harder to collect and connect the information needed for taxation. It also makes both reliable transaction tracking and the filing burden on investors important considerations.

Investors also looked beyond administrative and IT readiness. Overall, 85.1% agreed that an investor protection framework should be in place before the tax takes effect. The tax would create new tax obligations for investors. Investors saw market safeguards as part of overall readiness, alongside the government’s ability to assess and collect the tax.

Responses on timing made this concern even clearer. Overall, 82.9% of respondents opposed implementing the current plan as scheduled or called for another delay. Another 75.2% said 2027 was too early. The survey then asked the 1,823 respondents who chose a later date what should happen if the necessary rules and preparations were still not in place by then. Among them, 93.4% said the tax should be postponed again until the system was ready.

For investors, the key issue was not simply how many years to delay the tax. They focused on whether the conditions for implementation were actually in place. These included tax administration, transaction data management, the filing system, and investor protection.

4. Impact on the Korean Market

Investors’ views of the current tax plan also point to how their trading behavior could change after implementation. A substantial amount of Korean crypto investment has already moved overseas. According to estimates from a previous Tiger Research report, about KRW 700 trillion, or roughly $490 billion, moved overseas between 2021 and the first half of 2026. Investors also already make wide use of trading routes outside Korean CEXs, including global CEXs and personal wallets.

The survey also examined how investment levels and trading routes could change after the tax takes effect. The results suggest that investors may reduce their investments, use Korean CEXs less, and make greater use of other trading routes. If these intentions translate into actual behavior, the changes could weaken the trading base of the Korean crypto market. They could also make it harder for authorities to identify taxable activity and supervise the market.

4.1. Impact Beyond CEXs on Korea’s Crypto Industry

The survey suggests that the tax could reduce both crypto investment and the use of Korean CEXs. Overall, 69.7% of respondents said they expected to reduce or stop their crypto investments. Another 73.1% said they were likely to use Korean CEXs less. This could reduce both the amount of capital invested in crypto and trading activity on Korean CEXs.

Investors also expected these changes to affect the broader Korean market. Overall, 66.4% of respondents said the tax would have a negative impact on Korea’s crypto market. If investors reduce their crypto exposure or move capital to other financial assets, trading volume and liquidity in the Korean market could decline.

To estimate the potential scale of this impact, Tiger Research analyzed how trading volume and revenue at major Korean CEXs could change. The analysis combines the survey results with changes in crypto trading volume observed in countries that already tax crypto.

Tiger Research estimates that annual trading volume at Korea’s three largest CEXs, Upbit, Bithumb, and Coinone, could fall from about $601 billion in 2026 to $421 billion in 2027. This represents a decline of about $180 billion, or 30.0%. Over the same period, revenue at the three CEXs could fall from about $722 million to $509 million. This represents a decline of about $213 million, or 29.5%.

A decline in trading activity could also affect tax revenue and the broader crypto industry. Lower trading fees could reduce related value-added tax revenue. Lower CEX profits could also reduce corporate tax revenue.

Crypto income taxation could create a new source of tax revenue. However, a contraction in the Korean market could reduce existing tax revenues at the same time. This could weaken the overall revenue gains from the new tax. Lower liquidity and a smaller user base at Korean CEXs could also weaken the foundation for related financial services such as custody and prime brokerage.

4.2. The Shift to Offshore Trading and the Limits of CARF

If investors use Korean CEXs less after the tax takes effect, some may shift their trading to global CEXs and personal wallets. Among investors who said they would use Korean CEXs less, 88.0% said they might increase their use of global CEXs or personal wallets. Among all respondents, 60.0% had already used a global CEX, and 33.3% had used a DEX.

Younger investors showed the strongest tendency to shift their trading. Among respondents in their 20s, 76.8% said they would likely use global CEXs more after the tax takes effect. Another 73.2% said they would likely increase their use of DEXs or P2P transactions through personal wallets. Investors who already use overseas CEXs and on-chain services may find it relatively easy to move their trading outside Korean CEXs.

As more trading moves outside Korean service providers, tax authorities may find it harder to obtain the same level of transaction information. CARF can help address this gap. It allows tax authorities across countries to exchange transaction data reported by overseas crypto service providers.

However, countries plan to begin these exchanges at different times. Korea plans to start in 2027. Hong Kong, Singapore, and the UAE plan to start in 2028, while the United States plans to start in 2029. These different timelines could limit access to overseas transaction data during the early years of the tax.

CARF also cannot capture the full flow of every transaction. According to Chainalysis, 59.1% of assets leaving CEXs in Japan moved to CARF non-covered routes in 2025. The share reached 65.2% in the United Kingdom, 75.4% in the United States, and 76.6% in Italy. In Italy, the share rose from 50.4% in 2024 to 76.6% in 2025. Transfers to personal wallets also increased by 45.7% over the same period.

These figures do not show that taxation directly caused the shift. However, they show that even in countries with crypto taxation and reporting systems, a substantial share of activity still moves through routes that service provider reporting alone cannot fully track.

This information gap could also raise concerns about tax fairness. Tax authorities can verify transactions on Korean CEXs more easily through data reported by service providers. They may need to rely more heavily on taxpayer reporting and subsequent verification for transactions through overseas CEXs and personal wallets. If investors believe that tax authorities can track some trading routes more easily than others, that perception could encourage more activity to move to overseas CEXs and DEXs.

Before the tax takes effect, the government needs to clarify the rules for acquisition costs and information reporting. It also needs to establish how tax authorities will verify gains and losses from transactions through overseas CEXs and personal wallets.

5. Rushing the Tax Risks Both the Industry and Tax Revenue

The central issue is not taxation itself. The question is whether Korea should implement the current plan in 2027 before the system is ready. Under current law, the tax on crypto income will take effect in January 2027. The survey shows that investors distinguish between the need for taxation and the current tax plan. Even supporters of crypto taxation said the rules need improvement. Some opponents also said they could accept the tax if the system improves.

Policymakers also need to consider the market impact of implementing the tax before the system is ready. As discussed above, investment and trading in Korea could decline. Some activity could also move to global CEXs and personal wallets.

These changes could weaken the trading base and competitiveness of the Korean market. They could also spread transaction data across more channels. This would make it harder for tax authorities to track the tax base. Creating a new tax base and managing it reliably in practice are separate challenges.

Policymakers should first determine whether the system can work under real market conditions. They should not set the implementation date first and address the remaining gaps later. The survey shows that investors cared more about whether the system was ready than about any specific year. Policymakers should define the conditions required for implementation before deciding when the tax should take effect.

Three areas require particular attention.

First, policymakers should assess tax readiness together with the broader state of market regulation. Tax administration alone is not enough. The market also needs clear rules, investor protection, and standards for new assets and services. Policymakers should assess both the government’s ability to collect the tax and the readiness of the market in which the tax will apply.

Second, policymakers need clear criteria to determine whether the tax can work in practice. They should assess how well the system can connect transaction data and calculate gains and losses. They should also confirm that taxpayers can correct errors when they occur. These criteria would allow policymakers to judge readiness based on actual implementation rather than a fixed schedule or the completion of IT systems alone.

Third, policymakers should conduct mock filings and pilot programs that reflect real trading conditions. The tests should cover more than simple cases involving Korean CEXs. They should also include global CEXs, personal wallets, and DEXs. Policymakers should identify missing transaction data, problems with acquisition costs, and recurring filing errors before the tax takes effect.

Policymakers should also consider public acceptance. The survey found strong concern that the tax could limit wealth-building opportunities, particularly among younger investors. Respondents across age groups also raised concerns about fairness compared with other financial assets. Technical readiness alone is not enough. Investors also need to view the tax rules and burden as fair.

The debate over the 2027 tax should go beyond whether Korea keeps the current start date. Policymakers need to assess whether the system can calculate gains and losses accurately under real trading conditions. They also need to confirm that tax authorities can obtain the necessary transaction data. Market rules and investor protection also need to be in place. Investors must also see the tax standards as fair. If Korea moves ahead before the system is ready, it could weaken both the competitiveness of the domestic market and the government’s ability to manage the tax base.

Appendix. Chainalysis-Based CARF Transaction Classification Criteria

This report uses analysis from Chainalysis to examine the share of crypto transactions that fall within CARF’s practical reporting scope across countries. Chainalysis analyzes activity across CEXs, personal wallets, DEXs, and DeFi. This allows us to examine transactions that service provider reporting alone may not fully capture.

The Crypto-Asset Reporting Framework (CARF) is an international reporting framework. It requires crypto-asset service providers to report user and transaction information to tax authorities, which can then exchange the information across jurisdictions. Based on Chainalysis’ classification, this report defines transactions within CARF’s practical reporting scope as “CARF-covered” and transactions outside that scope as “CARF non-covered.” CARF non-covered activity includes some transactions after assets move to personal wallets, as well as activity involving DEXs, P2P transfers, DeFi, mining, and staking.

However, “CARF non-covered” does not mean that a taxpayer failed to report a transaction or evaded tax. A service provider may report the initial withdrawal to a personal wallet, but it may not have visibility into every transaction that follows. In this report, “CARF non-covered” refers only to the scope of transactions that service provider reporting can identify.

🐯 More from Tiger Research

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• Korea Crypto Market: A Guide to the Rest of 2026

• KRW 700 Trillion Abroad: The Market Korea Missed

• Crypto Exodus: 160 Trillion Won Leaves Korea

Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

Terms of Usage

Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn’t harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research’s reports, it is mandatory to 1) clearly state ‘Tiger Research’ as the source, 2) include the Tiger Research logo. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.

Key Takeaways

• Despite high trading volumes, Korea’s crypto market still relies heavily on retail investors because regulation limits corporate participation. Corporate account access could broaden the market’s demand base and support its next stage of growth.

• Corporate crypto assets under management could reach up to KRW 82 trillion by 2030. Trading, custody and prime brokerage could also create about KRW 570 billion in annual revenue.

• Further delays could push Korean demand and business opportunities offshore. This shift is already visible in payments and asset management, and overseas markets could build customer relationships and operating experience before Korea fully opens its market.

1. Korea’s Crypto Market: Limited Upside Without Institutional Participation

Korea is one of the world’s most active crypto markets. The Korean won has accounted for around 30% of global crypto trading volume by fiat currency in recent years, second only to the US dollar. At one point, its share exceeded 50% and even surpassed that of the dollar. Given Korea’s population and economic size, this level of activity is unusually high.

Yet Korea’s domestic crypto industry has not grown at the same pace. The valuations of major Korean and global crypto companies highlight this gap. Direct comparisons have limits because capital market size and business scope differ across countries. Even so, the valuation gap remains substantial. Dunamu, Korea’s largest crypto company, has a valuation of only about one-seventh of Coinbase’s.

Retail investors drove the growth of Korea’s crypto market, while regulation restricted corporate participation. The United States shows a different pattern. Institutional investors account for more than 80% of Coinbase’s trading volume, making institutional demand a core part of the market. Korea has generated substantial trading volume, but corporate demand has remained largely absent. This has limited the industry’s ability to move into its next stage of growth.

2. Corporate Account Delays Put a KRW 82 Trillion Market on Hold

Korea has delayed corporate account access beyond the original timeline. In 2025, the Financial Services Commission planned to first allow around 3,500 listed companies and registered professional investor corporations to trade crypto for investment purposes, then expand access in phases. Yet the first phase has not started, and the government has not set a timeline for broader corporate access. These delays continue to limit corporate capital inflows into Korea’s crypto market.

Corporate account access could broaden demand in Korea’s crypto market. We estimated the potential market based on assets under management at private financial firms and public funds such as pension funds. For 2027, we used crypto allocation levels in markets with more established corporate participation, such as the United States, as a benchmark. This puts the upper end of Korea’s corporate crypto assets under management at about KRW 16 trillion.

The market could grow further as more corporations participate. From 2028, we factored in asset growth and higher crypto allocations. We applied a 5% allocation to private financial firms based on the investment limit discussed in Korea. We applied 2% to public funds to reflect their more conservative approach. Under these assumptions, corporate crypto assets under management could reach KRW 35.2 trillion in 2028, KRW 57.1 trillion in 2029 and up to KRW 82 trillion in 2030. This represents the upper end of the potential market. The actual size will depend on the pace of regulatory changes and market conditions.

2.1. A KRW 570 Billion Corporate Financial Services Market

Corporate account access could expand Korea’s crypto financial services market beyond trading. Corporations need reliable execution for large orders, secure custody, and treasury and risk management. These needs create demand for custody, prime brokerage and other services beyond CEX trading.

Based on revenue models in overseas corporate markets, KRW 82 trillion in corporate assets under management could generate about KRW 570 billion in annual revenue by 2030. This includes trading fees and revenue from custody, trade execution and treasury management.

As corporate assets under management grow, demand for these services will rise as well. Custody, prime brokerage and other corporate services could give Korea’s crypto industry new revenue streams beyond retail trading fees.

2.2. Beyond Trading: Expanding the Crypto Industry

Corporate accounts matter not only for investment trading but also for businesses that use crypto. Stablecoin payments and remittances are key examples. These services require companies to trade crypto directly and settle in KRW. In Korea, restrictions on corporate trading have also held back the growth of these businesses.

Overseas markets already support a wide range of crypto businesses. Companies such as Rain, BVNK and Mesh provide payment and settlement infrastructure. Public and private companies use different valuation methods, which limits direct comparisons. Even so, several companies in this sector have reached multi-trillion-won valuations.

Corporate account access could open the door to similar businesses in Korea. Payment and fintech companies could expand crypto-based payment and remittance services. Other companies could also use crypto for payments and settlement. Corporate account access could help Korea’s crypto industry expand beyond trading into new business areas.

2.3. Corporate Participation Could Improve Market Liquidity

Strong retail participation has driven high trading volumes in Korea’s crypto market. Yet the market still struggles to absorb large orders compared with major global CEX. Our analysis of Bitcoin spot trading over the past week found that a KRW 10 billion order produced 213.2bp of round-trip slippage across Korea’s three largest CEX combined. Under the same conditions, Binance recorded just 12.2bp. The gap widened as order size increased.

This suggests that Korea’s market lacks sufficient depth relative to its trading volume. Even with high trading activity, the order book may not hold enough liquidity to absorb large trades. As order size rises, price impact increases. Korea therefore has less capacity to handle large trades despite its high trading volume.

Corporate account access could help address this gap by broadening market participation and attracting professional liquidity providers. Deeper order books could reduce price impact and trading costs for large orders. Better liquidity could improve trading efficiency for both corporate and retail investors

3. Delayed Access Pushes Opportunities Offshore

As Korea delays corporate account access, domestic crypto demand is already shifting overseas. Allium data shows that B2B stablecoin payments between Korea and other countries reached about USD 620 million from January 2021 to September 2026. The data excludes CEX deposits and withdrawals and investment-related transactions. It covers only payments for goods and services. This shows that businesses already use stablecoins for payments and settlement beyond investment activity.

Much of this demand is already moving into overseas markets. Some import-export businesses cannot easily handle stablecoins in Korea, so they rely on overseas entities or partners in markets such as Hong Kong for conversion and settlement. Hyperithm provides crypto asset management services to corporate clients in Japan, while Mirae Asset Securities is expanding its digital asset business in Hong Kong. Korean demand and business capabilities are already creating commercial opportunities in overseas markets with the regulatory framework to support them.

If this trend continues, companies operating overseas will build not only customer bases and revenue but also business relationships and operating experience. Once companies establish payment networks and commercial relationships abroad, those activities may not return quickly even if Korea opens its market later. Businesses are also likely to keep investing in markets where they have already built customers and operating experience. Delays in corporate account access therefore do more than postpone capital inflows. They could push business opportunities that might otherwise develop in Korea to take root overseas first.

4. The Next Step for Korea’s Crypto Market: Corporate Account Access

Corporate account access could do more than bring corporate capital into crypto. It could create a new financial services market. As estimated above, corporations could manage up to KRW 82 trillion in crypto assets by 2030. Trading, custody and prime brokerage could generate about KRW 570 billion in annual revenue. More corporate capital would also increase demand for services that support trading, custody and asset management.

The impact could extend beyond financial services. Greater corporate use of crypto could drive demand for payments, remittances, accounting, tax, security, anti-money laundering (AML) and data services. The key question is whether these opportunities develop in Korea. If they do, Korean companies can capture the revenue and build operating experience at home. Domestic transactions would also make transaction flows easier to track and strengthen taxation and market oversight.

Korea already has high trading volumes and strong demand for crypto. Yet restrictions on corporate participation have kept this demand from driving growth across financial services and related industries. Corporate account access could connect existing demand with the growth of Korea’s crypto industry and expand a market built around retail investors to include corporate investors and businesses.

🐯 More from Tiger Research

Read more reports related to this research.

• Korea Crypto Market: A Guide to the Rest of 2026

• KRW 700 Trillion Abroad: The Market Korea Missed

• Crypto Exodus: 160 Trillion Won Leaves Korea

Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

Terms of Usage

Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn’t harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research’s reports, it is mandatory to 1) clearly state ‘Tiger Research’ as the source, 2) include the Tiger Research logo. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.

Key Takeaways

• The Bank of Korea’s CBDC has entered live-transaction testing under Project Han River Phase 2, but a won-denominated stablecoin still has no legislative basis.

• The revised STO bill has passed, but permitted assets and licensing details are left to presidential decree. The market’s direction will be set when those regulations appear, not when the bill passed.

• With the consultative council aligned on a tokenization roadmap for stocks, bonds, and money market funds, the priority is bringing proven, standardized securities on-chain rather than sourcing new fractional-investment assets.

• Hana Bank’s stake in Dunamu (6.55%, 1.0033 trillion won, about $733 million) and Mirae Asset Consulting’s stake in Korbit (97.15%, 141.4 billion won, about $103 million) point to securing infrastructure for combined STO, RWA, and stablecoin services, not fee income alone.

• Overseas tokenization pilots take six months to a year, while domestic financial institutions close their budgets in early December. Implementation should start now, not wait for the detailed rules.

1. A Fragmenting Global Crypto Market and Korea’s Position

The crypto ecosystem appears borderless on the surface, but in practice national borders are becoming sharper as each country establishes its own regulatory framework.

The EU has implemented MiCA, the United States is advancing the GENIUS Act and the CLARITY Act, and in Asia, Singapore, Hong Kong, and Japan have each settled on their own regulatory approaches. Major economies are embracing the market through clear policy, but because those policies diverge, the global market is fragmenting along regional lines.

Korea is building its own environment within this trend. Investment demand and public interest in Korea are very high, but the country’s regulatory pace lags somewhat behind that of major economies.

2. Where Korea’s Crypto Market Stands Today

In the first half of 2026, Korea’s regulatory environment raised expectations of full incorporation into the formal financial system, including passage of the STO-related bill, but a series of market-restraining statements, including discussion of taxation, added to confusion within the ecosystem.

2.1. Bank of Korea’s Project Hangang Phase 1 Results (March 29, 2026)

The Bank of Korea released the first-phase results report for its deposit-token-based CBDC live-transaction pilot on December 18, 2025, then formally announced the start of Phase 2 on March 29, 2026.

Phase 2 goes beyond simple technical verification to test real conditional fund disbursement, including electric vehicle subsidies and official expense accounts. The number of participating banks has expanded to nine, and the pilot has added peer-to-peer transfers, biometric authentication, and automatic deposit conversion. Live transactions are expected to begin as early as September, though no separate testing period has been set. The absence of a fixed end date reflects an effort to sustain the service on an ongoing basis rather than treat it as a one-time demonstration.

While the CBDC has advanced substantially through Project Hangang, a won-denominated stablecoin remains far from realization.

While Project Hangang has moved forward, Phase 2 of the Digital Asset Basic Act, which would institutionalize a won-denominated stablecoin, has been delayed by roughly a year. The delay stems from disagreement between the Bank of Korea and the Financial Services Commission. The Bank of Korea has argued that a bank consortium should hold a stake of at least 51 percent, while the Financial Services Commission has opposed that requirement on the grounds that it would stifle innovation.

Various policy alternatives were subsequently proposed, but legislative discussion came to a complete halt in the aftermath of the June local elections, and the process has remained stalled without clear progress since. The government and the Financial Services Commission announced plans in July to resume work in the second half of the year and pass legislation before year-end, but the process has been delayed again after Rep. Park Min-gyu of the Democratic Party, a member of the National Assembly’s Political Affairs Committee, signaled that the task force would be reorganized after the party’s August convention, with the bill to be introduced in September.

The Bank of Korea-led CBDC has already entered the live-transaction verification stage and is producing visible results, while a won-denominated stablecoin remains in an uncertain state without even a legislative basis. Premature optimism about this area should therefore be treated with caution, and it should be recognized as a long-term undertaking that will require considerable time before the market settles.

2.2. Passage of the STO-Related Bill in the National Assembly (January 15, 2026)

On January 15, 2026, revisions to the Act on Electronic Registration of Stocks, Bonds, etc. (the Electronic Securities Act) and the Financial Investment Services and Capital Markets Act (the Capital Markets Act) passed a plenary session of the National Assembly. This brought to an end the three-year regulatory sandbox regime that had been in place since the Financial Services Commission released its “Plan to Reorganize the Regulatory Framework for Issuance and Distribution of Security Tokens” in February 2023.

The revision rests on three pillars: recognizing the legal status of the distributed ledger, introducing the issuer account management institution system, and detailing a distribution roadmap for investment contract securities.

• Legal recognition of the distributed ledger: extends the legally valid forms of securities registration, previously limited to physical certificates and electronic securities, to include blockchain-based distributed ledgers.

• Introduction of the issuer account management institution system: gives issuers that meet the qualification requirements the authority to register and manage securities directly with the Korea Securities Depository, without going through a financial institution as intermediary.

• A more concrete distribution roadmap for investment contract securities: establishes a legal basis for securities firms to broker trading, improving the secondary trading environment and market liquidity for fractional-investment assets that had previously been fragmented.

The revised law was promulgated on February 3, 2026, and will take full effect on February 4, 2027, following a one-year grace period. It is still too early to expect immediate market activation from the legislative basis alone, because key practical requirements, including the specific scope of permitted assets, have been delegated to presidential decree and supervisory regulations, and detailed guidelines have not yet been announced.

The public-private Token Securities Council, launched on March 4, 2026, to work out those guidelines, is discussing the detailed plan. The Financial Services Commission originally planned to publish the subordinate regulations and guidelines around July 2026, but the timeline slipped when the process remained at a closed-door consultation stage with the legal and financial sectors as of July 31. As of late August, working-level officials expect the announcement sometime between September and November.

One encouraging aspect of the council’s discussions is the inclusion of standardized securities such as stocks. At the second meeting, held on May 15, the council reached consensus on a phased roadmap that includes tokenizing existing standardized securities such as stocks, bonds, and money market funds, and building on-chain settlement infrastructure. This suggests that the market, previously confined to fractional investment, could expand.

Rather than concentrating on sourcing new assets, as existing fractional-investment operators have done, building a model to distribute on-chain the standardized securities whose demand has already been proven could create a larger market opportunity. Domestic institutions should therefore study concrete precedents closely and build diverse global partnerships early, moving quickly enough to be well positioned once the market matures in earnest.

2.3. Amended Special Financial Information Act Takes Effect (August 20, 2026)

The amended Act on Reporting and Using Specified Financial Transaction Information, commonly known as the Special Financial Information Act (Act No. 21358), was promulgated on February 19, 2026, and took effect on August 20, 2026. Not all of its provisions apply as of that date. Stricter screening for virtual asset service provider (VASP) registration took effect on August 20, while strengthened Travel Rule requirements and rules governing transactions with overseas providers and personal wallets will apply around February 2027, six months after the enforcement decree is promulgated.

• Stricter VASP registration screening: introduces review of major shareholders and raises financial soundness and creditworthiness requirements, raising the barrier to entry (effective August 20)

• Strengthened Travel Rule: removes the 1 million won (about $730) threshold that had triggered the information-sharing requirement and extends it to all transactions (effective around February 2027)

• Stricter rules for overseas providers and personal wallets: differentiates permitted transaction scope by risk level (effective around February 2027)

The core change to VASP registration screening is an expanded definition of major shareholder. The review now closely examines the financial soundness and creditworthiness of the largest shareholder, any shareholder who has appointed a majority of the CEO and directors, and, where the shareholder is itself a corporation, that corporation’s largest shareholder and representative.

The strengthened Travel Rule targets transaction splitting used to avoid reporting. For transfers between reported VASPs, the information-sharing threshold expands from 1 million won or more to all transactions, and the obligation to obtain that information now also falls on the receiving provider.

Overseas transactions are also being brought out of the regulatory blind spot. Rather than an outright ban, the rule applies three tiers of risk-based restriction. Transfers to low-risk overseas exchanges are permitted without a same-name requirement for sender and recipient. Transfers to other overseas exchanges and personal wallets are permitted only when the sender and recipient are the same person, meaning the wallet must be held in the user’s own name. Transactions with high-risk overseas exchanges are banned entirely. For overseas exchange and personal wallet transactions of 10 million won (about $7,300) or more, reported VASPs must build and operate their own suspicious transaction monitoring system.

2.4. No Additional Deferral for Virtual Asset Taxation (August 3, 2026)

Virtual asset taxation, whose effective date was set at January 1, 2027, through a December 2024 amendment to the Income Tax Act, will proceed as scheduled under current law after the government’s August 2026 tax reform proposal excluded any additional deferral provision. Bills from the People Power Party seeking deferral or repeal remain pending, however.

In addition, a petition submitted through the National Assembly’s public petition system points to inadequate tax infrastructure, capital outflows overseas, and declining corporate tax revenue from weaker exchange earnings, but the National Assembly and the government remain divided in their response.

2.5. Exchange Stake Investment Gains Momentum

Traditional financial institutions and large capital groups are acquiring stakes in virtual asset exchanges not simply to generate returns but to secure an early position in the digital finance market. With VASP (virtual asset service provider) regulation making direct market entry difficult, equity investment offers an efficient alternative that reduces regulatory risk while providing immediate access to a large user base and liquidity.

• Dunamu (Upbit’s parent company): Hana Bank acquired a 6.55% stake (1.0033 trillion won, about $733 million, resolved May 15, 2026), becoming the first commercial bank to hold a large stake in the company. On August 18, BitGo Korea’s VASP registration was accepted, completing a dual-track structure combining the Upbit stake with BitGo custody services. Hanwha Investment & Securities expanded its stake to 9.84%, becoming the third-largest shareholder, while Samsung affiliates, Samsung Securities (2%), Samsung SDS (1%), and Samsung Card (1%), together acquired a combined 4% stake (612.8 billion won, about $448 million), establishing a division of roles across security tokens, infrastructure, and payments.

• Korbit (acquisition completed): Mirae Asset Consulting acquired a 97.15% stake (141.4 billion won, about $103 million), completing the acquisition. Because the acquiring entity is Mirae Asset Consulting, a non-financial affiliate, the Fair Trade Commission’s approval was likewise explained as not constituting direct investment by a financial company.

• Coinone (change of largest shareholder approved July 22, 2026): Korea Investment & Securities and OKX Ventures each acquired a 20% stake (roughly 80 billion won, about $58 million, each). The ownership structure was reorganized to CEO Cha Myung-hoon at 30.36%, Com2uS Holdings at 24.54%, and Korea Investment & Securities and OKX Ventures at 20% each, marking a case of a securities firm holding a direct stake.

• Bithumb (unresolved): Negotiations with Kiwoom Securities effectively broke down on August 5 over valuation and management control, and talks with Kakao have also dragged on. A multi-layered governance structure and the second-largest shareholder Vidente’s effective stake of more than 32% make a sale of existing shares difficult.

Exchange stake investment continues on this basis, and the pattern suggests that investors see exchanges over the long term as the next-generation financial infrastructure where STO, RWA, and stablecoin functions converge, positioning themselves ahead of an anticipated opening of corporate accounts and a fuller entry of institutional investors.

3. What Lies Ahead for Korea’s Crypto Market

As outlined above, Korea is in a transitional period of building its institutional framework, but regulatory barriers that hold back industry growth remain widespread at the same time. Because the market’s direction will depend heavily on the corporate governance changes among major virtual asset service providers and on legislative progress concentrated in the fourth quarter, these turning points warrant close attention.

3.1. Deal-Closing Season (September to December)

The stock swap between Dunamu and Naver Financial is likely to be the first matter to conclude.

Because the Fair Trade Commission’s business combination review has been delayed, the completion date for the comprehensive stock swap has been pushed back twice, first from June to September, then to December 31. The shareholders’ meeting has been rescheduled accordingly to November 19, and Naver Financial has set a target of listing within five years of the merger, with a clause allowing an extension if that timeline proves unworkable.

For Bithumb, a concrete three-stage roadmap has been laid out: securing new investment starting in early August, filing a preliminary listing review in 2027, and completing an IPO in 2028. However, with negotiations with Kiwoom Securities effectively broken down and discussions with Kakao continuing to stall, there is a risk that the roadmap could fall behind schedule at its very first step, the investment round.

The VASP re-registration process is also concentrated toward year end. Preliminary submissions begin in late October, formal applications close on November 20, and the Financial Intelligence Unit’s substantive review follows. In addition, registration for virtual asset transfer businesses becomes mandatory when the amended Foreign Exchange Transactions Act takes effect in early December, making this an important juncture for regulatory compliance as well.

3.2. Legislative Turning Point (September Regular Session of the National Assembly)

The government’s draft of the Digital Asset Basic Act is likely to take shape during the September regular session, introduced as member-sponsored legislation. The most sensitive issue is whether to require private stablecoin issuers to secure a bank stake of at least 51 percent and whether to cap major shareholder stakes at exchanges to improve corporate governance.

At the same time, the authorities regard amending the Capital Markets Act to regulate single-stock leveraged ETFs as an urgent priority, raising concern that legislative momentum for the Digital Asset Basic Act could weaken more than expected.

Because passage of this bill is directly tied to whether won-denominated stablecoins become institutionalized, it stands as the most decisive variable likely to reshape the market going forward.

3.3. Finalizing STO Subordinate Regulations

The enforcement decree and guidelines that will set the detailed standards for the STO market have missed their original July target and remain delayed as of late August. An announcement is expected sometime in the second half of the year, but no specific date has been set.

Once the guidelines are finalized, they will clarify the scope of underlying assets eligible for issuance as security tokens, the licensing requirements for over-the-counter exchanges, and investor trading limits. The Korea Securities Depository has begun building its system with a target of 2027 implementation, and as the subordinate regulations continue to lag, concerns are growing that a gap between actual issuance and distribution could leave the market with a period of inactivity.

4. How Companies Should Approach the Korean Market

As shown in the landscape of domestic institutional relationships that Tiger Research has mapped, major institutions are continuing to expand cooperative relationships across the board to build a genuine business value chain.

Established financial institutions are leading the effort to build concrete business precedents, and Web3 projects, both domestic and international, are increasingly concentrating their resources on securing strategic partnerships with institutions rather than retail users.

This shift partly reflects the current slowdown in retail market liquidity, but it also reflects a longer-term strategic view, that real value creation within the formal financial system must come first before retail demand can be reignited.

4.1. Domestic Institutions: Making the Attempt Matters

Large-scale equity investment by traditional financial institutions continues, but the current regulatory framework limits the ability to develop a genuine business model within Korea. Institutions are left waiting for the STO subordinate regulations to be finalized or confined to limited testing through the regulatory sandbox, which makes the most effective alternative building out a business preemptively in an overseas jurisdiction where the institutional groundwork is already complete.

Waiting passively for regulatory clarity has clear limits when it comes to securing market position, and the sandbox track is confined to the narrow scope of fractional investment, making it difficult to extend to standardized securities. Domestic institutions should therefore treat building operational capability centered on an overseas base, difficult as that is right now, as their top priority.

Hong Kong manages security tokens within its existing financial regulatory framework and permits secondary distribution through licensed exchanges, offering an integrated environment for issuance and trading. Singapore offers excellent regulatory transparency but a considerably high barrier to entry, while the United States offers an issuance path through exemption provisions when using specific platforms.

Domestic financial institutions that already have overseas networks would therefore do better to focus first on the potential of their existing footholds rather than spend time exploring new jurisdictions. Rather than getting absorbed in extensive legal interpretation, a more strategic approach is to quickly test feasibility through working-level meetings with leading local platforms.

This moment in particular is a critical window.

Overseas tokenization projects typically take six months to a year or more, from initial analysis through issuance and distribution. Given Korea’s STO regulations and the February 2027 enforcement of the Electronic Securities Act, now is the right time to pursue overseas pilots that can work in tandem with the domestic market. Waiting until the domestic system is fully in place would waste more than a year, so institutions should confirm a concrete checklist and roadmap and act now.

4.2. Web3 Projects: The Same Applies, Act Now

The first gate to collaborating with Korean financial institutions is not technical capability but contracting-entity eligibility. Even for a proof of concept, information security review and vendor registration must come first, and registration is frequently denied outright when the applicant has no Korean corporate entity. Where establishing a local entity is not feasible, projects need a strategic structure that puts a credible Korean partner forward as the contracting entity.

Another key variable is the budgeting cycle specific to Korean financial institutions. Most begin drafting next year’s strategy in October and finalize their budget allocations in early December. After the budget is actually executed from January onward, available resources are quickly depleted and momentum for pursuing new projects drops sharply. Projects planning to do business with these institutions should treat the current period as the window for making a proposal, because missing it substantially lowers the odds of a project moving forward.

Retail strategy also needs a full overhaul. The current market slowdown stems from a broader global downturn, so retail marketing is unlikely to deliver the results it once did. Messaging now needs to center on track record rather than promotion. Because institutional references have already accumulated to the point that a simple memorandum of understanding no longer moves the market, securing references with substantive weight has become the more important strategy.

Many foundations are also eliminating their retail budgets entirely, but AI technology is lowering costs, so unless a project is prepared to give up retail engagement altogether, the better approach is to make retail spending more efficient rather than cut it entirely.

5. An Opportunity to Observe Market Change

These rapid shifts in Korea’s virtual asset market and its move toward institutional incorporation are expected to become clearer and take more concrete shape around Korea Blockchain Week 2026 (KBW2026), to be held in September. KBW2026 is expected to serve as more than a technical or academic exchange or a networking event, functioning instead as a venue for substantive discussion of the shift underway between established finance and the Web3 ecosystem.

At this year’s event, rather than retail-focused marketing, the dominant theme is expected to be multilateral strategic discussion among financial institutions, policy authorities, and major virtual asset service providers, aimed at building business models that comply with regulatory guidelines within the formal financial system and establishing real-world use cases.

Domestic and international companies and research institutions should therefore closely analyze the policy recommendations and inter-institutional cooperation roadmaps presented during KBW2026, and use that analysis to secure an early position in the institutionalized virtual asset market expected to fully emerge going forward.

🐯 More from Tiger Research

Read more reports related to this research.

• The Crypto Market’s Shift: From Narrative to PMF

• Korea Institutional Crypto: 2026 Landscape

Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

Terms of Usage

Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn’t harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research’s reports, it is mandatory to 1) clearly state ‘Tiger Research’ as the source, 2) include the Tiger Research logo. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.

Crypto exchanges are expanding into traditional assets through perpetual futures. Korean stock-linked perpetual futures have already reached KRW 307 trillion in trading volume within months. This report looks at the rise of offshore liquidity and what Korea needs to participate in this market.

Key Takeaways

• Crypto exchanges are rapidly expanding into stocks, commodities, and other traditional assets through perpetual futures.

• Korean stock-linked perpetual futures reached KRW 307 trillion in trading volume within months, increasing the importance of offshore markets.

• Korea needs corporate access to domestic crypto exchanges, a formal derivatives framework, and KRW stablecoin infrastructure.

1. Crypto Exchanges Are Expanding into Traditional Markets

Crypto exchanges are expanding beyond digital assets and into traditional markets. Bitcoin and Ethereum once dominated trading on these platforms. Today, exchanges are rapidly adding products linked to stocks, commodities, and other traditional assets.

Hyperliquid, a leading decentralized exchange, has seen a growing share of trading in traditional asset-linked products in 2026. More users are also trading these products. Infrastructure originally built for crypto is now emerging as a new venue for traditional financial markets.

Perpetual futures are driving this shift. These derivatives let investors gain exposure to price movements without owning the underlying asset. Unlike traditional futures, they have no expiration date and do not require physical delivery.

This structure allows exchanges to launch products linked to stocks and commodities with relative ease. It also gives crypto exchanges a practical way to expand beyond digital assets and into traditional markets.

2. Korea Is No Exception: Korean Stock Trading Moves Offshore

Korea is already at the center of this shift. Offshore crypto exchanges actively trade perpetual futures linked to major Korean stocks such as Samsung Electronics and SK hynix. These products trade at night and on weekends. They also offer high leverage. As a result, they give both Korean and global investors a new way to gain exposure to Korean stocks. An offshore market is rapidly emerging where investors can trade Korean stock price movements regardless of domestic market hours.

The market is growing rapidly. From February through August 2026, cumulative trading volume in perpetual futures linked to Korean stocks reached about KRW 307 trillion. In August alone, trading volume reached KRW 166 trillion. This was nearly four times the KRW 42 trillion traded on Korea’s five largest crypto exchanges over the same period. In just a few months, offshore perpetual futures linked to Korean stocks have grown to a scale that exceeds Korea’s major domestic crypto market.

For some products, perpetual futures trading already far exceeds trading in the underlying ETF. In August 2026, perpetual futures linked to KORU, a U.S.-listed 3x leveraged Korea ETF, recorded about USD 24.1 billion in trading volume. KORU ETF itself recorded USD 8.9 billion. The perpetual futures volume was about 2.7 times that of the ETF. More trading took place in the derivative than in the ETF itself. If derivatives trading exceeds the underlying market, offshore venues could play a larger role in price discovery.

More importantly, offshore derivatives markets can also affect the spot market. Market makers that provide liquidity for perpetual futures hedge their exposure by buying and selling related stocks or ETFs. Higher derivatives volume can increase these hedging trades. Sharp price moves can also increase them. These flows can then affect prices in the spot market.

This structure can create a “tail-wags-the-dog” effect, where derivatives drive spot prices rather than simply follow them. The impact may remain limited for large-cap stocks such as SK hynix because spot trading volume is still much larger. However, the gap between derivatives and spot trading volumes is narrowing quickly. This trend warrants close attention.

3. Liquidity Shifts Offshore as Global Markets Evolve

Offshore trading in Korean stocks is not unique to Korea. Perpetual futures are rapidly expanding across stocks and indices in markets such as Korea, Japan, and China. Their reach now extends beyond listed securities. Offshore venues already offer perpetual futures linked to private companies such as Anthropic. They also offer products linked to Chinese memory chipmaker CXMT ahead of its stock market debut. Assets that were once difficult to trade through traditional securities markets are now entering the perpetual futures market. This is rapidly blurring the traditional boundaries of what investors can trade.

The participants in this market are changing too. Among Hyperliquid accounts with more than USD 10 million in assets, the share that trades traditional assets such as stocks and commodities has risen rapidly. The Wall Street Journal (WSJ) has also reported that professional Wall Street traders use perpetual futures after regular market hours and on weekends. A market that once centered on crypto investors now attracts professional traders and investors that manage large pools of capital.

Liquidity in the perpetual futures market also deserves attention. Based on the latest 15-day average, a USD 1 million trade in SK hynix perpetual futures results in only single-digit basis-point slippage. Slippage remains relatively low even outside regular market hours. This means the market has enough depth to absorb large orders even when the Korean stock market is closed. Perpetual futures are moving beyond simply extending traditional market hours. They are becoming markets with liquidity of their own.

The capital used for trading is changing as well. Some global exchanges now accept tokenized U.S. Treasury assets as collateral. These include BlackRock’s BUIDL and Hashnote’s USYC. Over the past year, cumulative transfers of USYC to exchanges reached about USD 2.75 billion. Not all of this amount served as derivatives margin. Still, institutions can hold familiar U.S. Treasury-backed assets and use them as trading collateral when needed. Traditional financial assets now serve as collateral in these new markets. This creates a new channel for capital to move between traditional finance and the new trading market.

What we are seeing is more than crypto markets expanding into traditional assets. An offshore market that offers exposure to Korean stock prices is growing rapidly without going through the Korean won, domestic brokerages, or Korean exchanges. Tokenized U.S. Treasuries serve as collateral in this market. Professional traders and investors that manage large pools of capital also participate. The shift now extends beyond the assets being traded. The market participants and the capital they use are changing as well.

Korean stock-linked perpetual futures recorded KRW 307 trillion in trading volume in just a few months. That figure shows how quickly this shift is unfolding. But KRW 307 trillion does not represent the size of a mature market. It reflects the current scale of a market that is still taking shape. If more assets become tradable and institutional capital enters at scale, offshore liquidity could grow further. This could reshape market structures that have long been divided by national borders and trading hours. It could also change how capital moves across markets.

4. Offshore Markets Grow: What Role Can Korea’s Financial Industry Play?

Korea can restrict Korean investors from trading these products, but it cannot easily stop offshore markets from growing. Some global exchanges, including Binance, restrict perpetual futures trading for users identified as Korean through KYC. But Korean stock-linked markets can continue to grow through overseas investors and global capital. In practice, Korean regulation limits the participation of Korean investors and financial institutions more than the offshore market itself. Even if Korea restricts local demand, trading and liquidity can still develop overseas.

Korea therefore needs to look beyond simply blocking this trend. It should also turn the growth of these new markets into an opportunity for its financial industry. Korea already has a starting point: its crypto exchanges. They cannot launch stock-linked perpetual futures right away. But they have experience operating 24-hour digital asset markets and already have a large user base. These strengths could support expansion into new markets. Global crypto exchanges are rapidly expanding into traditional assets. Korea should also review the rules and market structure needed to support this shift.

Trading infrastructure alone is not enough. Korea also needs corporate access to the market, a regulatory framework for derivatives, and KRW-based payment and settlement infrastructure. Corporate accounts would bring in professional capital for market making, hedging, and arbitrage. They would also add liquidity. A formal framework for derivatives such as perpetual futures would support products linked to a wider range of assets. KRW-based payment and settlement tools, such as a KRW stablecoin, could improve access for overseas investors and ease capital flows. These are not separate regulatory issues. They are all necessary for the market to function.

Korea should build a framework that allows these elements to work together rather than address them one by one. This would allow Korean crypto exchanges to move beyond crypto trading and connect a wider range of assets with global liquidity. Trading linked to Korean assets is already growing rapidly offshore. The challenge is not simply to stop that growth. What matters more is how large a role Korea’s financial industry can play in this market.

🐯 More from Tiger Research

Read more reports related to this research.

• KRW 700 Trillion Abroad: The Market Korea Missed

• Crypto Exodus: 160 Trillion Won Leaves Korea

• Korea Institutional Crypto: 2026 Landscape

Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

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The industry shift driven by AI is already underway. Decades of advertising-supported web content are giving way to a world in which agents pay for the data they use. This report, produced with EastPoint, examines that shift.

Key Takeaways

• As AI agents extract only the data they need and move on, the banner advertising model is breaking down, and platforms are shifting toward charging agents directly.

• To handle the vast number of automated micropayments agents generate, fee-free stablecoins and on-chain payment standards such as x402 are emerging as essential infrastructure.

• As happened with payments in the music streaming market, the per-transaction price will fall, but the sheer volume of machine-driven usage will outweigh that decline, making the overall market substantially larger.

• Actual commercial adoption today remains at an early, roughly 1% to 10% adopter stage. Before the market matures, companies that build agent payment infrastructure now are the ones best positioned to remain relevant in the next paradigm.

1. An Agent World Without Web Ads

Over the past three decades, the internet content industry has grown on an advertising-based business model.

Users were exposed to advertising in exchange for free access to services, and the fees advertisers paid formed the financial basis for running these platforms.

Services could be offered for free because people visited sites and viewed the ads. As AI agents become the primary consumers of the web, however, there are fewer people left to view them.

AI agents access the web differently than people do. A person who visits a site reads its content and, in the process, is naturally exposed to banner ads. An AI agent, by contrast, extracts only the information it needs from a platform and leaves. As a result, the structure that once reliably exposed people to advertising is breaking down.

This shift undermines the revenue models that existing content and data companies rely on, seriously enough that many incumbents are now grappling with what the agent era means for their business.

2. Payment Infrastructure to Replace Web Ads

Consider a recipe platform that, anticipating the agent era, decides to charge every agent that accesses it. For an agent to retrieve a recipe from that platform, several conditions have to be met.

1. Payment rails: the platform needs infrastructure that allows agents to make payments.

2. A means of payment: the agent needs funds it can spend.

3. Payment delegation: controls that keep the agent from making payments outside its owner’s intent.

2.1. Payment Rails: The Emergence of the x402 Standard

Platforms need a machine-to-machine (M2M) channel that lets agents receive bills and settle them automatically, without human involvement. This requires pay-per-call billing infrastructure: a system that charges and settles each API call immediately.

One approach, taken by incumbents such as Mastercard and Ant Group, converts their existing large-scale card and simple-payment networks into agent-specific API solutions.

Existing financial networks, however, are structurally too heavy to run an approval process every time an agent requests data, which can happen dozens of times per second.

The crypto-based x402 standard has moved into that gap. Because wallet addresses communicate directly, without intermediaries such as value-added networks (VANs) or payment gateway providers, x402 allows atomic settlement similar to paying a toll, and it has emerged as a major alternative optimized for machine-to-machine transactions.

2.2. Payment Method: The Rise of Stablecoins

For an agent to purchase recipe data, it needs a way to hold and spend funds. One approach already in use links the agent to a user’s existing fiat-based fintech account or credit card infrastructure, giving it access to those payment methods. This approach, however, is better suited to conventional shopping.

Few people would pay a dollar for a banana cake recipe that used to be free. Conversely, when a transaction requires a micropayment as small as $0.0001, processing it through a conventional credit card or payment gateway network incurs fees that exceed the value of the transaction itself.

Stablecoins have drawn considerable attention as an alternative to this problem, because they function as programmable money, which makes them far better suited to an environment in which agents settle micropayments automatically and in real time, without a complex approval process.

2.3. Payment Delegation: The Delegation Framework as a Safeguard

Even with payment rails and a funding method in place, a wallet cannot simply be handed to an agent without safeguards. Strict controls are needed to prevent unintended overspending or exposure to malicious activity.

The mechanism that limits an agent to spending within a defined scope, rather than granting it unrestricted authority, is known as a delegation framework. To maintain smooth and secure control, a delegation framework verifies three main elements.

1. Identity: verifies who is making the payment. It identifies the owner of the requesting agent and assesses its trustworthiness, using mechanisms such as Know Your Agent (KYA) checks and decentralized identifiers (DID), to prevent identity theft and misuse.

2. Permissions: sets detailed rules for how the agent can spend funds, including the specific platforms it can use, the maximum amount per transaction, and the validity period.

3. Settlement: through smart contracts or on-chain rules, funds are finalized atomically only when the conditions set above are fully met, which removes the risk of disputes at the source.

The following section examines how, from 2025 to the present, companies have standardized these technologies and connected them to the market.

3. From Standards Competition in 2025 to Distribution Competition in 2026

In 2025, crypto-native firms and incumbent financial and technology companies competed to establish technical specifications favorable to their own positions, each vying for leadership in agent payments.

Major standards emerged, including Coinbase’s x402 and Visa’s Trusted Agent Protocol (TAP), but most amounted to little more than published specification documents or developer SDKs.

For an agent to actually transact, identity verification, payment channels, final settlement, and counterparty matching all need to work together as an integrated system; however, each camp offered only a fragmented, self-centered layer of the protocol, and none produced the integrated ecosystem an agent would need to function.

Accordingly, 2026 is becoming the year in which the technical standards established so far move beyond nominal specification competition and into actual distribution.

Incumbent payment and financial infrastructure players are entering the field on the strength of their large merchant networks and the trust built into fiat-based systems. Ant International and Mastercard, for example, are layering agent-specific APIs on top of their existing large-scale payment networks, building a bridge between the established commerce ecosystem and AI agents.

Crypto-based infrastructure providers, meanwhile, are expanding into agent commerce and real-world usage on the strength of wallets and blockchain networks.

Coinbase has built infrastructure, through wallet and Model Context Protocol (MCP) payment integration, that lets developers and agents execute micropayments instantly within AI client environments such as Claude. Circle has extended its stablecoin payment infrastructure to nine major blockchain networks, and OKX has leveraged its existing crypto user base to secure a channel for agent transactions.

Where 2025 was a year in which each camp offered only a technical blueprint, the first half of 2026 has become a year of direct competition, as on-chain payment standards and traditional financial networks each press their respective strengths to integrate with actual AI platforms and commerce environments and claim the position of de facto standard.

4. Usage Is Real, but Adoption Is Not Yet Mass

A figure of 100 million users means something entirely different depending on whether the ecosystem that service belongs to totals one billion people or ten million.

The technology adoption lifecycle proposed by management scholar Everett Rogers, known as diffusion of innovation theory, divides adoption into five segments.

• Innovators: 2.5%

• Early adopters: 13.5% (16% cumulative)

• Early majority: 34% (50% cumulative)

• Late majority: 34% (84% cumulative)

• Laggards: 16%

Reaching what is commonly called mass adoption, meaning more than seven in ten respondents actually using the technology, requires moving past the early majority and into the late majority segment.

Using this framework, the following sections examine adoption in the consumer and enterprise segments. Agent payments do not yet have a single authoritative global statistic, so what follows draws on individual company disclosures and data from specialized research firms.

4.1. Consumers

• Alipay AI Pay: Ant Group has disclosed 100 million users for AI Pay. Set against Alipay’s total user base of 1.3 billion, that represents an actual usage rate of 7.7%.

• NielsenIQ: according to NielsenIQ, 34% of consumers delegate product search to AI and 23% delegate review summarization. Only 8% of respondents had let AI complete a purchase entirely on its own.

• Accenture: in an Accenture survey of 25,000 people across 16 countries, 9% said they would allow an agent to make purchases autonomously.

• Gartner: in a survey of U.S. consumers, only 11% said they would allow AI to make purchasing decisions even in low-risk categories.

Taken together, these figures put average consumer adoption in the low teens, indicating that agent usage is still at an early stage.

4.2. Enterprises

On the enterprise and developer side, agent payment adoption remains a small sample by any measure. Individual company case studies, ecosystem metrics reviewed by independent auditors, and industry-wide adoption surveys all point to the same conclusion. As with the consumer segment, there is no single official statistic for this sector, so the following draws on individual disclosures.

When OpenAI launched Instant Checkout in September 2025, it was announced as covering more than one million Shopify merchants, but only about 12 merchants had actually activated live payment functionality.

Measured against Shopify’s total merchant base, estimated at 5.5 million to 6.8 million depending on the source, a range with nearly a twofold spread, that puts the usage rate at roughly 0.0002%.

The state of the x402 ecosystem, the agent payment specification, makes clear how early this adoption remains. Only about 500 services are registered in its payment directory, and when the auditing firm ScoutScore examined all of them, just 43% operated correctly according to the specification.

As a result, only a small number of companies are running agent payment infrastructure commercially in production.

5. What Mass Adoption Would Bring

The core change that agent payments bring to the content and data markets is a mechanism combining falling per-unit prices with rising usage volume.

A single human visit to a webpage generates roughly $0.005 in ad revenue, while a machine reading and paying for the same data pays around $0.001, about a fifth of the per-visit figure. Machines, however, read far more often and in far greater volume than people do.

The music industry has already gone through this same structural shift once. As the industry moved from CDs priced at $15 apiece to streaming, which pays $0.003 to $0.005 per play, the per-unit price collapsed by a factor of thousands.

Once that micropayment model, charging roughly $0.003 per track, took hold, however, hundreds of millions of people worldwide began playing music continuously: during commutes, while exercising, and even while sleeping.

In other words, per-unit revenue from individual pieces of data will fall as agents take over, but the sheer volume of machine-driven calls and usage will outweigh that decline, and the overall size of the market and total revenue will end up larger.

6. This Is the Innovator and Early Adopter Stage

Both the consumer and enterprise segments have so far seen limited active participation in agent AI payment adoption.

On Everett Rogers’s adoption curve, both segments remain within the innovator (2.5%) and early adopter (13.5%) range, roughly 5% to 14% combined, well short of the mass adoption stage in which more than seven in ten people use the technology regularly.

These early figures need not be read as disappointing. If anything, they point to why companies should act now, while it is still possible to identify and correct problems before mass adoption arrives.

Security vulnerabilities that recently surfaced in the x402 ecosystem illustrate the transitional problems facing this early-stage infrastructure. An examination of the 15 major providers that together account for 99% of transactions found payment verification and settlement violations at every one of them, along with 31 newly identified vulnerabilities.

A handful of companies, including Coinbase, have since moved to fix some of these flaws, but most providers and the foundations governing the protocol have not made corresponding improvements at the specification level, leaving the underlying structural problems largely unresolved.

Moving straight to mass adoption without first resolving the instability in this early infrastructure would mean building on an unstable foundation.

The AI agent payment market today, then, is better understood as a period requiring patience: rather than rushing into premature mass adoption, the priority is to build technical trust and infrastructure ahead of the mainstream market to come.

This restructuring of the industry has become a trend that cannot be reversed, and a significant industry challenge. To address this rapid paradigm shift and its implications for the industry from multiple angles, EastPoint: Seoul 2026 will be held on September 28 at the Westin Parnas Seoul.

In particular, the session “Autonomous AI in the Real World: From Decentralized Systems to Robotics“ will be moderated by Jun Park of Hashed, with participation from experts including Chi Zhang of Kite AI, Jaemin Jin of Magic Labs, Jan Liphardt of Openmind, and Junghee Ryu of RLWRLD.

The panel will examine, in depth, the conditions under which AI agents and robots can function as genuine economic actors in trustless environments, along with ways to integrate finance and digital assets into that shift.

🐯 More from Tiger Research

Read more reports related to this research.

• Payments 3.0 The AI Agent Payments Market

• AI Agent Wallet Infrastructure: The Layer Behind a 700% Revenue Scale-Up

Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

Terms of Usage

Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn’t harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research’s reports, it is mandatory to 1) clearly state ‘Tiger Research’ as the source, 2) include the Tiger Research logo. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.

The global digital asset market has expanded into derivatives, payments, and on-chain services, while Korea remains centered on spot trading. Korean investors have moved unmet demand overseas. Tiger Research and Chainalysis tracked roughly 120,000 Korea-linked wallets to analyze about KRW 700 trillion in outflows from 2021 to 2026.

Key Takeaways

• Korean investors are moving money overseas to access products unavailable in Korea. About KRW 700 trillion left domestic exchanges between 2021 and 2026.

• The money does not stop at foreign exchanges. Korean investors also trade derivatives on DEXs, participate in prediction markets, and spend stablecoins with crypto cards.

• Foreign exchanges capture more than trading fees. They also gain customers, data, and operating know-how from Korean demand.

1. A Growing Global Market, a Stalled Korean One

The global digital asset market is taking a different shape. Institutional capital is entering a market that grew up around retail spot trading, and blockchain now extends across the financial value chain. Both the type of capital the market draws and the ways investors use digital assets are changing.

Bitcoin and Ethereum spot ETFs have widened institutional access to the market, and derivatives markets for perpetual futures and options are growing quickly. Stablecoins have expanded beyond a means of trading crypto into payments and remittance, and tokenization of real-world assets is changing how issuers create and distribute assets. The global market reaches well beyond trading into finance more broadly.

These changes are not moving at the same pace everywhere. The Korean market still centers on retail spot trading, and institutional participation remains limited. Derivatives and newer financial services that are growing in the global market have yet to form a meaningful market in Korea. As the global market broadens, the structural gap with Korea widens.

This gap is visible in trading volume as well. Global exchanges have expanded into perpetual futures and other products alongside spot, while trading in Korea remains concentrated in spot alone. Korean exchanges therefore account for a steadily smaller share of combined volume across major Korean and global venues. Volume is only one measure of a market, yet it shows that the Korean market is losing ground as the global market expands.

2. Unmet Demand, Investors Heading Offshore

The Korean market’s declining share does not mean Korean investors have lost interest. Products and services difficult to access at home have expanded rapidly abroad, and investors have moved to foreign exchanges and on-chain services to reach them. Unmet demand in Korea has not disappeared. It now shows up as actual trading and service use abroad.

The scale is significant. Tiger Research partnered with Chainalysis to analyze on-chain data that tracks cryptocurrency flows from Korean to overseas exchanges. Between 2021 and 2026, an estimated $530 billion moved overseas through these channels. Outflows reached approximately $120 billion in 2025 and are projected to reach approximately $52 billion in 2026. These figures capture only identifiable flows, and the true scale is likely larger.

Absolute outflow figures alone can make outflows look as though they have slowed. Market-wide contraction pulls down trading volume in Korea and outflows together, so absolute amounts say little about how strong the outflow is. To measure this more accurately, the analysis introduces a net outflow ratio. The ratio divides net outflows to foreign exchanges by the combined spot volume of Korea’s three major exchanges, Upbit, Bithumb, and Coinone. Absolute outflows have declined, but the net outflow ratio has risen. Capital is leaving faster than the Korean market is shrinking.

When unmet demand moves abroad, the economic value moves with it. Trading fees are the most direct case. Korean investors generated an estimated $3.5 billion in fee revenue for foreign exchanges in 2025 and another $0.9 billion in the first half of 2026, based on Tiger Research’s own methodology. Demand originating in Korea is becoming revenue for foreign operators.

The value accumulating abroad goes beyond fee revenue. The more Korean investors trade and use services abroad, the more customer relationships and transaction data accumulate with foreign operators. Those operators read Korean demand more precisely on that basis, and they build the capacity to design and run new products. Unmet demand does not only generate revenue abroad. It also builds the competitive strength foreign operators need to create and expand new businesses.

3. Beyond Foreign Exchanges: Investment Demand Moves On-Chain

Capital leaving Korean exchanges does not stop at foreign ones. Tiger Research used Chainalysis’s fund-tracing tool, Reactor, to track fund flows from wallets it identified as Korean-owned. Funds that moved abroad did not stay at foreign exchanges. They passed through personal wallets and moved into on-chain services including decentralized exchanges and prediction markets.

To confirm this pattern went beyond a small set of wallets, the analysis extended to approximately 120,000 wallet addresses that Tiger Research attributes to Korean investors. The results showed significant investment activity outside foreign exchanges, including leveraged trading through decentralized exchanges and participation in prediction markets. Unmet demand in Korea now reaches beyond foreign exchanges into on-chain markets.

3.1. Derivatives Demand Moves to Decentralized Exchanges

Unmet demand for derivatives trading is moving to decentralized exchanges. On-chain analysis covering January 2024 through July 2026 found that Korean-owned wallets deposited a cumulative approximately $1.64 billion into three decentralized exchanges: Hyperliquid, Lighter, and Variational. These platforms run active leveraged trading centered on perpetual futures, and they absorb demand for derivatives that Korean investors find difficult to access at home.

Leverage turns deposited capital into far larger trading volumes. In July 2026 alone, approximately 1,200 Korean-owned wallets generated $4.97 billion in notional trading volume on Hyperliquid. Leverage can inflate notional figures, but nearly $5 billion in a single month shows that on-chain derivatives trading by Korean investors has reached a meaningful scale.

Trading on Hyperliquid reaches beyond cryptocurrency into traditional assets. Between January and July 2026, Korean-owned wallets traded products based on SK Hynix, Samsung Electronics, and crude oil among their top instruments. High leverage and access outside regular market hours appear to drive part of this demand. Investors want to trade traditional assets in ways the existing market does not offer, and that demand is finding its way on-chain.

The size of capital involved varies widely. Over the analysis period, the research identified approximately 7k Korean-owned wallets, and some of them managed capital at considerable scale. One Korean-owned wallet put approximately $780k in margin behind a 10x leveraged short on an SK Hynix-based perpetual future on Hyperliquid in July 2026. Trading sizes across these wallets range broadly, and large-scale capital works in on-chain derivatives markets as well.

3.2. Prediction Markets: Another Option for Korean Investors

Korean investors are also active in prediction markets, one of the fastest-growing segments in global digital assets. Prediction markets let participants trade on the outcomes of future events across politics, economics, and sports. Korea restricts this type of trading, but Korean investors trade actively on Polymarket. On-chain analysis covering January 2024 through July 2026 identified approximately 3,700 Korean-owned wallets on Polymarket, and their cumulative trading volume reached approximately $438 million.

Trading rose sharply alongside major political events in Korea. Between March and June 2025, when impeachment proceedings and the presidential election followed one another, Korea-related markets accounted for more than half of total trading volume among Korean-owned wallets. Cumulative trading volume in Korea-related markets over the full analysis period reached approximately $62 million.

After the presidential election, the share of Korea-related political markets fell quickly, but trading continued across a wide range of subjects, including global affairs, the FIFA World Cup, the KBO League, the LCK, and even Seoul weather forecasts. Trading that had concentrated on Korean politics dispersed into other markets, which shows that Korean investor activity on prediction markets does not stop at specific political events.

A breakdown by market shows where Korean investor interest concentrated. Global issues such as the U.S. presidential election ranked at the top by volume, and Korea-related political markets including the election of President Lee Jae-myung also drew high volumes. Korean investors traded across major global issues, and they traded Korea-related markets at meaningful size as well.

Wallet counts make the character of Korea-related markets clearer. Korea-related political markets, including the election of President Lee Jae-myung and the removal of former President Yoon Suk-yeol, drew more Korean-owned wallets than U.S. presidential election markets did. Global issues and Korea-related markets both ranked near the top by volume, but Korea-related political markets drew broader participation by wallet count.

3.3. Payment Demand Flows to Offshore Crypto Cards

Crypto cards are spreading rapidly worldwide, and the market for spending digital assets is growing with them. A crypto card connects digital assets to existing card payment networks so users can spend much as they would with a traditional card. Users issue a virtual card through an app for online and mobile payments, and some services also provide physical cards for use at brick-and-mortar merchants. Digital assets are moving beyond trading and investment into everyday payments.

Demand for foreign crypto cards is growing in Korea as well. As of late July 2026, cumulative Korean downloads of major crypto card apps, including RedotPay, KAST, ether.fi, Tria, and Plasma, reached an estimated 38k. On-chain analysis of RedotPay and ether.fi identified approximately 1,000 Korean-owned wallets across the two services.

Funds flowing from these wallets into crypto cards have trended upward. Monthly top-up volumes for RedotPay and ether.fi rose notably from 2026, when the KRW/USD exchange rate stayed elevated. The data does not establish a direct causal link between the exchange rate and top-up volumes, but the pattern suggests that some users hold dollar-pegged stablecoins not only as a store of value but to fund card payments. Digital assets that moved abroad now serve as spending money as well.

Payment volumes come into clearer view through ether.fi. Both RedotPay and ether.fi let users spend deposited digital assets by card, but the range of data visible on-chain differs between them. RedotPay data covers top-up inflows to the card. ether.fi data extends to fund flows connected to payments, which lets the analysis measure spending by Korean-owned wallets. Funds deposited into ether.fi flow through to merchant payments, which shows that stablecoins serve everyday spending as well as holding.

Crypto cards matter because capital that moves abroad may never return after investment and may go on to fund consumption instead. Individual wallets show this pattern. One high-value Korean-owned wallet that Tiger Research tracked moved funds from a Korean exchange to a personal wallet, traded on Hyperliquid and Polymarket, then transferred a portion to an ether.fi card for payments. Capital that left a Korean exchange kept working abroad and on-chain, and it carried through from investment into consumption.

4. The Window to Turn Capital Flows Around

The scale of capital that has moved abroad is already substantial, but room remains to change its direction. As the analysis above shows, Korean investor demand has not declined. It turns into trading and service use at foreign exchanges and on-chain services instead. Future capital flows can look different if Korea builds a market able to absorb that demand.

What matters is building both at once: an environment that keeps capital at home, and a path for capital already abroad to come back. Widening the range of demand Korea can meet will slow new outflows, and lowering the institutional friction in the repatriation process will bring capital already abroad back home. Turning the direction of capital around requires both.

4.1. Building a Reason for Capital to Stay

For capital to stay in Korea, Korean firms need to absorb changing investment demand in the Korean market. The global digital asset market has expanded beyond spot trading into derivatives and a wide range of services, and traditional assets now trade in new forms through stock perpetual futures and tokenized stocks. Korea has yet to put in place the rules and standards these products require, and exchange businesses remain concentrated in spot trading. Demand exists in Korea. The structure makes it difficult for Korean firms to connect that demand to new products and markets.

Global operators have widened their business lines as the market changed. Major global exchanges including Coinbase and Binance expanded into adjacent areas such as derivatives and institutional services, and they built or acquired the technology and infrastructure they needed. When new demand formed, they connected it to existing business and grew it into new markets. Korean operators, by contrast, found it difficult to expand into new businesses within the digital asset market and had to look to other industries for growth. This difference stems less from the ambition of the operators than from the regulatory foundation available for turning new demand into business.

Stock perpetual futures show why Korean firms need the ability to respond to new investment demand. As the analysis above showed, Korean-owned wallets trade perpetual futures based on Korean stocks, including SK Hynix, on foreign platforms. The SK Hynix perpetual future tracks the Korean share price closely and keeps trading through evenings and weekends when the Korean stock market closes. It reflects the underlying asset with reasonable fidelity and forms a price outside regular trading hours, which suggests it could serve as a price signal that complements the Korean spot market. Unmet demand in Korea does not only turn into trading abroad. It also produces market functions that Korea could put to use.

Absorbing this demand in the Korean market requires more than case-by-case decisions on whether to permit individual products. Regulators need to set standards that let firms commercialize new products and services within the regulatory framework. Rather than permitting every product at once, they need to define clear investor protection and risk management requirements, and firms that meet those requirements should be able to expand as demand changes. That is how Korea can change a structure in which demand created at home becomes a market abroad first, and how firms can keep the business experience and competitive capabilities they build along the way inside Korea.

4.2. Widening the Path for Capital to Return

Capital that has already moved abroad will not return on its own, even as investment opportunities in Korea expand. Bringing funds back requires multiple verification steps, and unclear reporting and tax standards raise the burden further. Alongside building an environment that keeps capital at home, Korea needs to lower the burden on capital already abroad that wants to come back.

Amendments to the Enforcement Decree of the Act on Reporting and Using Specified Financial Transaction Information (FTRA) are tightening anti-money laundering controls on virtual asset transfers. The Travel Rule will apply regardless of transaction size, while transactions with foreign exchanges and personal wallets will face risk-based controls. AML controls remain necessary, but unclear verification requirements can make it harder to bring funds back to Korea. Regulators should set clear standards to reduce unnecessary friction for legitimate transfers.

Once taxation takes effect, investors will face more to consider when they bring assets held abroad back to Korea. Assets that have moved across foreign exchanges, personal wallets, and on-chain services require confirmation of acquisition cost and past transaction history, but the standards for handling complex transactions and for accepting supporting documentation remain insufficiently specific. The problem lies less in the tax itself than in the burden and uncertainty investors face when they reconstruct and report past transactions before the rules are fully in place. Outflows from Korean exchanges tended to rise during periods when search interest in tax filing climbed, so the effect of that uncertainty on capital flows deserves attention.

Bringing capital back therefore requires two things. Korea needs to revise regulations that constrain legitimate fund movements without cause, and it needs to make the standards and procedures for necessary regulations explicit. AML controls and taxation both serve a purpose, but strengthening verification and reporting obligations before the underlying standards exist can discourage even legitimate capital from returning. Capital that moved abroad can come back only if Korea maintains the controls it needs while cutting the unnecessary burden that fund movements now carry.

5. When Capital Returns, Opportunity Follows

This analysis points to more than capital outflows. As unmet demand in Korea turns into trading and service use abroad, foreign operators capture the revenue and new business opportunities that demand generates. What matters is building a market in Korea that can absorb this demand and redirecting home some of the revenue and opportunity that now arises abroad.

The scale is significant even on trading fees alone. Korean investors paid an estimated $3.5 billion in trading fees to foreign exchanges in 2025. Assuming the same trading activity and fee rates, routing 10% of that activity through Korean operators would generate approximately $357 million in revenue, 25% would generate approximately $893 million, and 50% would generate approximately $1.79 billion. Korea does not need to create new demand to reach these figures. Redirecting home a portion of what Korean investors already do abroad is enough.

The value Korea could create runs beyond trading fees. Coinbase started in spot trading and widened into custody, institutional services, and stablecoins, and in the first quarter of 2026 it drew nearly half of its total revenue from businesses outside trading. Dunamu, by contrast, draws most of its revenue from KRW spot trading fees. The same digital asset demand can produce very different market sizes depending on whether operators can connect it to a broad range of products and services.

Korea needs to build the foundation that lets its operators turn new demand into business before this difference widens further. The global market is already expanding quickly, but Korea has yet to put in place the regulatory foundation for commercializing new products and services. Korea can still widen the scope of its market before the gap sets, which makes this a critical window for the Korean digital asset industry. Alongside building that foundation, Korea needs to give the trading and capital now heading abroad a reason to choose the Korean market.

Tax policy is one way to create that reason. Thailand exempts individual capital gains on digital asset transactions through licensed domestic operators from income tax from 2025 through 2029, which steers investors toward the regulated market. Korea can treat taxation not only as a source of revenue but as a policy instrument for drawing trading and capital into the Korean market.

Redirecting home even a portion of the demand and capital now heading abroad would produce effects beyond trading fees. It would widen the market in which Korean operators can build new products and services, which can translate into corporate growth and industrial competitiveness. Growth in the market and in the firms within it generates economic value that stays in Korea over the long term, and it broadens the tax base as well. This window calls for more than putting regulations in place. It calls for building the conditions under which a new market can grow in Korea.

Appendix. Methodology

This report identifies and analyzes wallets attributed to Korean investors using on-chain address labeling data that Tiger Research built in-house. Tiger Research has analyzed on-chain fund flows in the Korean digital asset market since 2023, accumulating the criteria and data needed to identify wallets linked to Korean investors. The current dataset holds approximately 5M address records associated with Korean and foreign exchanges, which served as the foundation for wallet identification.

Tiger Research drew on open-source intelligence (OSINT) alongside on-chain data to identify and verify these wallets. It checked wallet addresses linked to public accounts on Discord, Twitter, and GitHub, and examined activity records visible on decentralized applications including OpenSea and POAP. Korea-specific events, airdrops, and other region-limited campaigns have been relatively active, which yielded a range of signals for establishing a Korean connection to individual wallets.

Tiger Research then used Chainalysis Reactor to analyze address relationships, fund flows, and clusters, and to cross-validate existing identification results. Reactor traced associated wallets that in-house data alone could not confirm, which significantly widened identification coverage. This analysis draws on approximately 120k wallet addresses attributed to Korean investors.

Tiger Research analyzed the on-chain activity of these wallets using the blockchain data platforms Allium and Dune. It traced fund movements and smart contract interactions at the wallet level, and it aggregated activity on major services including Hyperliquid, Polymarket, and crypto cards. This showed where funds held by wallets attributed to Korean investors go once they leave exchanges, and what activity follows.

These 120k addresses do not represent the full population of Korean digital asset investors. Most Korean investors trade inside centralized exchanges, and relatively few use personal wallets or on-chain services directly. This dataset does not aim to represent all investors. It analyzes the fund flows and behavior of Korean investors who move assets outside exchanges and use on-chain services. It includes wallets that use on-chain services repeatedly or manage capital at meaningful scale, which makes it well suited to examining the activity of that investor segment.

🐯 More from Tiger Research

Read more reports related to this research.

• Crypto Exodus: 160 Trillion Won Leaves Korea

• Korea Institutional Crypto: 2026 Landscape

Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

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Key Takeaways

• Asian markets lack the regulatory architecture needed to classify prediction markets, forcing regulators to leave them in a gray area.

• Western jurisdictions leverage existing frameworks like derivatives regulation in the US or betting laws in the UK, which create clear entry paths for operators and establish regulatory oversight.

• The absence of a framework in Asia does not suppress market activity, as evidenced by significant liquidity flowing into offshore platforms, but it prevents tax collection and consumer protection.

• Building a regulatory foundation requires a public deliberative process to determine whether prediction markets should be treated as derivatives, gambling, or a new third category.

1. Definition and the Importance of Classification

As that earlier report established, prediction markets have value as information platforms, but the law has never drawn a clean line between them and gambling.

That raises the question of how the law defines gambling, and in particular betting.

Section 9 of the UK’s Gambling Act 2005 broadly defines the subject matter of betting as follows, and brings any such activity within the scope of gambling regulation once monetary value attaches to it.

• the outcome of a race, competition or other event or process,

• the likelihood of anything occurring or not occurring, or

• whether anything is or is not true.

Under this legal definition, prediction markets attach economic value to the outcome of a specific event or the determination of a fact, which means they share much of their structural core with betting, the central element of gambling.

The core of the regulatory debate ultimately comes down to a question of definition: whether to 1) bring prediction markets within the traditional gambling regulatory framework, 2) reclassify them under a financial architecture such as derivatives, or 3) establish them as an independent category through separate legislation.

2. The West: How Institutional Pathways Produced Different Outcomes

Compared to Asia, Western jurisdictions have a more permissive stance toward prediction markets, but not because of a cultural tolerance for gambling. It reflects the availability of institutional architecture that allows them to bypass a direct confrontation with gambling law. The main pathways were as follows.

• United States: Prediction markets were classified as derivatives (swaps) under the Commodity Exchange Act and brought within the existing registration framework.

• United Kingdom: The market was accommodated within a general-purpose “betting intermediary” licensing regime.

• European Union: Where contracts are classified as financial instruments, a binary options ban applies; where that classification is avoided, strict national gambling laws present a second barrier.

The consistent pattern is that institutional incorporation was only possible in jurisdictions that possessed an alternative regulatory framework, derivatives law or a flexible licensing regime, independent of gambling statutes.

2.1. United States: Extending the Definition of Derivatives

The United States accommodated prediction markets not by endorsing the gambling framing but by applying the existing contract structure of the Commodity Exchange Act (CEA) in a purposeful way.

• Commodity Futures Modernization Act of 2000 (CFMA): Established the foundation through an open-ended definition of “excluded commodity,” which allowed non-financial variables such as election outcomes and weather events to be classified alongside conventional commodities such as crude oil.

• Dodd-Frank Act of 2010: Gave the CFTC two critical powers:

  1. Exclusive federal jurisdiction over event contracts.

  2. The authority under Rule 40.11 to prohibit individual contracts related to terrorism, assassination, war, and gaming.

Neither statute was designed with prediction markets in mind, but together they created the legal basis for treating such contracts as financial agreements rather than gambling. They also established a centralized regulatory counterparty in the CFTC, replacing what would otherwise have been a fragmented process of state-by-state lobbying.

The legal architecture that accumulated over time produced a market ordered around licensed entities.

In November 2020, Kalshi secured Designated Contract Market (DCM) status, allowing it to sell a broad range of event contracts to retail investors. Polymarket, after a 2022 enforcement action, moved toward regulatory compliance through its 2025 acquisition of licensed exchange QCEX.

2.2. United Kingdom: Incorporation Through a General Licensing Framework

Rather than treating prediction markets as an extension of derivatives, the UK approached them as a form of betting and used the existing Gambling Act 2005 to accommodate them within the regulatory perimeter. Three provisions were particularly important.

• Section 9: Defines betting broadly enough to provide a flexible legal foundation for prediction markets.

• Section 13, “betting intermediary”: Captures the structural feature of prediction markets precisely, as they match contracts between users rather than taking direct positions themselves.

• Section 65(4): Allows the licensing categories to be adjusted by ministerial order, giving the framework the capacity to absorb new market models without separate legislation.

In February 2026, the Gambling Commission clarified that prediction market platforms fall within the “betting intermediary” category and must obtain the corresponding license. ,. Rather than a blanket prohibition, this constituted a clearly defined entry path, with strict penalties for unlicensed operation on one side and an open registration window on the other.

Despite this established framework, the major global platforms have been cautious about entering the UK market, for reasons rooted in their US litigation strategy.

Both Kalshi and Polymarket have staked considerable legal argument on the position that prediction contracts are financial derivatives rather than gambling. Obtaining a UK “betting intermediary” license would formally designate them as gambling operators, which would undermine their legal position in ongoing US proceedings.

This gave the UK a market environment shaped differently from the global standard, one that in practice created ideal conditions for UK-local operators to build their business. Matchbook, an existing betting exchange, drew on its betting intermediary license to launch “Matchbook Predictions” in January 2026, and Versus, a newer entrant, obtained a UKGC general betting license and launched its own prediction market.

2.3. Europe: Dual Closure Under Financial and Gambling Regulation

The regulatory landscape on the European continent combines financial regulation under MiFID II with individual national gambling laws to form a two-layer barrier.

• Any contract classified as a financial instrument immediately encounters the binary options prohibition.

• Any contract that escapes that classification then faces strict national gambling definitions.

In July 2026, the European Securities and Markets Authority (ESMA) made the financial regulation dimension explicit in an official statement, which stated that the binary payout structure of event contracts falls squarely within the scope of the binary options ban. This effectively closed the financial product route into the European market.

Prediction markets face equally difficult conditions under gambling law. France is the clearest illustration: the Autorité Nationale des Jeux (ANJ) implemented a phased enforcement escalation that concluded by classifying prediction market operations as illegal gambling.

The one exception is Gibraltar. In July 2026, Gibraltar designed a dedicated legislative framework, the Prediction Market Regulations, that defines prediction markets as a distinct “third category.” This is a strategy of creating a new pathway rather than working within the existing frameworks, but as Gibraltar is not an EU member state, the approach has the limitation of not being subject to mutual recognition within Europe.

The closed structure in Europe is not necessarily permanent, however. The European Commission has currently made the legal treatment of prediction markets a formal item under review as part of its Markets in Crypto-Assets Regulation (MiCA) review process. Depending on the conclusions of the report due in June 2027, the door remains open to a shift toward a new institutional framework for accommodating prediction markets.

3. Asia: The Present State of Institutional Absence

Asian jurisdictions have two structural obstacles that do not exist in the same form in Western markets.

• State-controlled gambling licensing: There is no general-purpose licensing framework capable of accommodating private sector innovation in the manner of the UK’s “betting intermediary” category. Licensing authority is allocated through state-controlled monopoly structures.

• Constraints on financial product classification: The financial laws of South Korea and Japan use closed, positive-list definitions of underlying assets, which makes the kind of broad reclassification the US achieved through the concept of “non-financial contingent events”, legally unavailable.

As the Western cases demonstrate, whether a prediction market takes hold depends on which path defines it, either existing financial product architecture or gambling regulation. The fundamental constraint facing Asian markets, however, is that neither classification system offers an institutional foundation capable of accommodating this new business model.

Legal betting markets already exist across Asia, in Japan, South Korea, Singapore, and Hong Kong, so any view that denies the market on grounds of emotional resistance or cultural specificity diverges considerably from the actual situation.

The central question, then, is not whether the market is socially accepted, but how a regulatory foundation could be designed to accommodate this new market model.

3.1. South Korea: Absent Architecture and Criminal Enforcement as the Default

Domestic discussion of prediction markets has not reached the stage of debating their legal status or social value. The existing regulatory framework treats them as speculative products by default, which cuts off substantive deliberation before it can begin.

The relevant statutory provisions are already in conflict with how prediction markets operate. The Act on Special Cases Concerning Regulation and Punishment of Speculative Acts covers “prize businesses,” defined as businesses that distribute money or property in exchange for correctly predicting the outcome of a specific event. This is structurally similar to what prediction markets do.

The legal question is not fully resolved, however. Prize business law presupposes a casino-style structure in which the operator directly controls the stake pool. Modern platforms such as Polymarket use a matching architecture in which the operator facilitates contracts between users rather than holding funds directly. No judicial interpretation has yet addressed how this structural difference would be treated under existing statutes.

The financial regulatory route is also closed. The Capital Markets Act uses a positive-list approach to defining underlying assets. While financial indicators are covered, there is no explicit basis for classifying non-financial variables such as election outcomes as derivatives.

Because the right to operate betting businesses is in any case reserved for state-monopoly entities, private platforms cannot enter the market through this channel either.

3.2. Japan: Sophisticated Workarounds and the Limits of an Informal Practice

Prediction markets in Japan have followed a pattern of regulatory workaround rather than institutional incorporation.

The method local platforms have adopted resembles the three-shop system, a mechanism that originated in the pachinko industry, in that it physically severs the direct cash flow within the operating process.

• Platform operator: The platform blocks direct cash deposits and instead runs a free reward model based on activities such as watching advertisements. It also eliminates any cash exchange function within the platform itself, which removes “gain or loss through property” as a defining element of gambling.

• Reward issuer: A third party independent of the platform issues the reward, such as a gift certificate, for a successful prediction. Separating the platform operator from the issuing entity removes the legal risk of the operator becoming a direct party to the exchange of rewards for cash.

• External cash-out market: A peer-to-peer transfer market and affiliated merchants outside the platform form the ecosystem where the reward is actually spent or converted into cash. Because the operating platform does not participate in this distribution process, the structure remains independent and avoids meeting the legal elements of the offense of gambling.

This is ultimately an informal commercial practice that emerged in a regulatory grey zone rather than a structure built on firm legal footing. Global platforms are either blocked from the Japanese market or operating under strict constraints through cryptocurrency exchanges. The substantive level of policy discussion in Japan is not materially different from that in South Korea.

4. What Asian Markets Are Forgoing

The absence of institutional architecture in Asia does not mean that the market does not exist. More than $52 million (approximately ₩72.8 billion) in liquidity flowed into prediction markets tied to South Korea’s June 2026 local elections, demonstrating that user participation in offshore platforms has already crossed a meaningful threshold even without a domestic regulatory framework. These transactions fall outside the tax system, consumer protection mechanisms are absent, and market integrity oversight is impossible.

Regulators face three available responses:

1. Extend existing criminal statutes to impose sanctions (the current South Korean approach).

2. Use technical means to block platform access entirely (the Singapore model).

3. Bring prediction markets within the regulatory perimeter, capturing tax revenue and supervisory authority in the process.

Only the third option can precisely achieve the practical regulatory objectives of tax collection, consumer protection, and market transparency.

Global annual transaction volume in prediction markets is projected to exceed $200 billion in 2026. Assuming conservatively that South Korean domestic users account for 1% of that volume, transaction volume attributable to any given Asian market would reach $2 billion. Depending on the tax model adopted, that would generate estimated new annual tax revenue of between $4 million and $43.2 million.

The more important point is not the size of these figures in isolation. Without regulatory accommodation, these transactions will not disappear; they will continue in an unregulated environment. Regulators will forgo both tax and supervisory authority while continuing to bear administrative and criminal enforcement costs.

5. Reframing the Regulatory Approach to Prediction Markets

As noted above, the institutional accommodation of prediction markets depends on which existing regulatory architecture, gambling or financial product, is used to define them.

• Gambling regulatory framework: This path adapts existing Asian models for state-approved speculative activities, such as sports betting pools or integrated resort casinos. It is consistent with the state monopoly structure and can be justified through the public fund rationale, but it has inherent limitations in accommodating the business models of private platforms.

• Derivatives regulatory framework: This represents the most operationally viable path with the least legal friction. It would involve fine-tuning the definition of financial products, drawing on precedents such as the acceptance of non-financial variables under Japan’s Financial Instruments and Exchange Act (FIEA) or on the language of “economic risk” in Korea’s Capital Markets Act. This approach avoids direct conflict with existing state gambling monopolies while pre-empting concerns about speculation and market manipulation by limiting eligible underlying assets to publicly verifiable statistical variables.

• Creation of a standalone third category: This involves designing a dedicated legislative framework, as Gibraltar has done. It allows for the most precise regulatory calibration but carries the highest legislative and political costs, given the absence of precedent.

It is worth noting that this is a long-term institutional undertaking rather than a near-term outcome. In many Asian jurisdictions, basic public discourse on the legal identity of prediction markets has not yet formed. Securing the legislative momentum necessary for any of these paths requires first establishing a public deliberative process and building broad social consensus on the value of prediction markets.

One point worth noting is that prediction markets remain an unfamiliar concept across Asia, and no entity has taken the lead in shaping discourse around the prediction market. As a result, even the most basic agenda items have yet to be discussed.

Precisely analyzing how prediction markets function overall requires a formal public forum, such as a public-private roundtable, built around the core issues raised above, and establishing one is now an urgent priority.

Even once that level of discussion is set, an entity capable of carrying it onto the actual policy table is essential. Specialized research organizations such as Limitless Research demonstrate data-driven forecasting models in practice, and in doing so play a central role in establishing the market’s value system and shaping public discourse.

The process by which organizations with specialized analytical capacity, beginning with Limitless Research, demonstrate the reliability and public value of their data will be the decisive catalyst that elevates the fragmented discourse on prediction markets into a core agenda item within the institutional system.

Prediction markets carry distinct benefits and risks, though reaching an institutional conclusion before that debate has even taken place would be a hasty approach that overlooks the core issue. What is needed now is the constructive discourse that has not yet occurred.

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Disclaimer

This report was partially funded by Limitless. It was independently produced by our researchers using credible sources. The findings, recommendations, and opinions are based on information available at publication time and may change without notice. We disclaim liability for any losses from using this report or its contents and do not warrant its accuracy or completeness. The information may differ from others’ views. This report is for informational purposes only and is not legal, business, investment, or tax advice. References to securities or digital assets are for illustration only, not investment advice or offers. This material is not intended for investors.

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Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn’t harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research’s reports, it is mandatory to 1) clearly state ‘Tiger Research’ as the source, 2) include the Tiger Research logo. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.

As of 2026, blockchain technology still hasn’t changed the world. But will it have brought major change by 2036?

All aboard — the time machine is departing for 2036.

1. “Does anyone still use paper money?”

The year 2036, A currency exchange booth in Zutopia, a fictional country vulnerable to inflation. Judy, thirty-four years into the job now, pulled a bill counter from the drawer and started counting Bucks.

“Still someone using Bucks.”

It made sense. The value of Bucks, the currency of an inflation-prone nation, fell a little more every day. It still existed by law, but in practice, no one used it anymore. Everyone used dollar stablecoins in daily life instead.

Tap-tap-tap-tap.

Judy listened to the counter clatter through the bills and thought back on the years.

In 2002, Judy was twenty-two. That year, Zutopia declared national default. Banks locked their doors, and people couldn’t withdraw the savings they’d spent a lifetime building.

“We need to go change it now.”

Judy’s father said. The moment your salary hit your account, you had to change it into dollars right away. Wait even a single day and the value of Bucks would visibly shrink. People checked the black-market dollar rate before they checked the front page.

“What’s the dollar at today?”

This question opened every day. Buying dollars at the official rate was next to impossible. The government set a monthly cap on how much foreign currency a person could buy, and no one knew when the banks might freeze dollar deposits.

Then, in the mid-2020s, young customers started asking a question she didn’t understand.

“Can I exchange USDT too?”

At first, only a handful of freelancers and exporters used it to receive money from abroad. No bank required, no lining up in front of a money changer. One phone, and you could turn Bucks into stablecoins, then back into Bucks whenever you needed.

At the time, Judy never thought it would replace her job. The elderly still wanted cash, and plenty of businesses still needed it too. But the line got shorter, bit by bit. The young customers disappeared first. Then the middle-aged ones.

By 2030, there was no line even on payday. Once companies had no reason to hold Bucks either, they started paying part of wages directly in stablecoins. Bucks became a currency you needed only to pay taxes and utility bills.

In 2033, the tax office changed its stance. The calculation was simple: it was better to collect overdue taxes in stablecoins than in Bucks. A short notice went up on the website.

“USDC and USDT accepted as alternative payment for tax filings”

Bucks still existed, but the state itself had just announced it would rather take someone else’s money than its own.

In 2034, the treasury followed. Bond auctions denominated in Bucks kept failing, and the treasury eventually issued new bonds denominated in dollar stablecoins. Civil servants’ pay came next. In 2035, some state governments began paying half of civil servant salaries in stablecoins — because the civil servants paid only in Bucks were the first, and the hardest, hit by inflation.

Printing money, collecting taxes, paying civil servants — these had always been the state’s power alone. That power moved to stablecoins, one piece at a time.

As of May 2026, the total stablecoin market stood at roughly $320 billion, with $28 trillion in annual transaction volume. Set against a U.S. wholesale payment network processing over $2 trillion a day, that was barely three weeks’ worth of volume. Strip out the wash trading and phantom volume, and less than 6% was actually used for real payments. The remaining 88% just circulated inside exchanges — trading, collateral, and back again.

The question was where that 6% was actually happening. It might have started in New York and Silicon Valley, but the place where that money actually changed hands wasn’t America. Americans got by just fine with their credit cards and bank accounts. The ones who desperately needed stablecoins were the people in countries where their currency melted away a little more every day.

Judy put the counter back in the drawer. Would there be a customer tomorrow?

2. Liquidated in Ten Minutes, at 2 A.M.

The year 2036, A small rented room in Singapore.

Two in the afternoon. A notification sound, and Lia checked her phone. A limit-order alert for Nvidia.

Two p.m. in Singapore is a time when the New York Stock Exchange isn’t even open. But on Lia’s screen, the Nvidia chart was still moving. She hit buy without hesitating. On the same screen, beside Nvidia, sat Treasury bonds, real estate REITs, and data-center infrastructure funds, all in one view.

By 2036, you didn’t just trade stocks — you could trade everything in the world.

“Investing never stops, no matter where you are.”

It was something Lia said often. For her, the world had always been like this.

In 2021, when Lia was nine, retail investors in the U.S. sent shares of GameStop, a brick-and-mortar game store, soaring. It was investing where participation itself became the point, more than the asset’s value — and the thing organizing that participation wasn’t a brokerage. It was an online community.

According to a 2025 World Economic Forum survey across 13 countries, 30% of Gen Z started investing the moment they became adults — far above Gen X (9%) and Baby Boomers (6%). Gen Z’s interest ran so deep that 86% had learned to invest before even entering the workforce, versus 47% for Boomers.

In Coinbase’s Q4 2025 survey, 73% of young respondents said it was hard to build wealth through traditional means — higher than the 57% among older generations.

For this new generation, investing had simply become a given — and they wanted exposure to more of everything.

June 2025. Tokens collateralized 1:1 against major U.S. stocks — Apple, Tesla, Nvidia — poured onto decentralized exchanges (DEXs). No nationality restrictions, no strict KYC checks. All you needed was a wallet address, and U.S. stocks were within anyone’s reach, with leverage effectively unlimited.

I can just try again tomorrow.

Lia logged into Lemming Brothers, a borderless trading platform, and bought a tokenized Korean real estate index product. Ten minutes later, her phone buzzed with a liquidation alert. She waved off the warning on her screen like it was nothing.

For Lia, phone notifications in 2036 are like background music to daily life. She checks the endless stream of signals from her trading apps and picks the phone back up again. It’s a complete contrast to her parents, who dollar-cost average into so-called “safe assets” on regulated exchanges.

In the world Lia lives in, every kind of value has been converted into an asset, moving nonstop, twenty-four hours a day. This vast market, which never pauses for even a moment, keeps tempting her toward the next trade — today, same as every day.

3. The Day $2.2 Billion Evaporated

The year 2036, A startup office in Pangyo Techno Valley.

Do-hyun, now twelve years into his career as an infrastructure engineer, was scrolling through the network status dashboard on his monitor when his hand stopped. Looking at the list of chains that now fit cleanly on a single screen, he murmured under his breath.

“Ten years ago you’d have scrolled forever. Now there’s not even ten left.”

2024, the year Do-hyun started his engineering career, was truly the Age of Discovery for Layer 2 (L2) rollups. Anyone could copy and paste a few lines of framework and stack code and launch their own blockchain under their own name. Do-hyun’s company rode the massive infrastructure wave too, building out validator nodes.

The chain’s name was Allchain. In June 2024, on airdrop hopes, Total Value Locked (TVL) swelled to $2.2 billion. He could still vividly remember clinking beer glasses in the conference room, cheering with the team.

“At this rate, aren’t we going to be the next Ethereum?”

But the joy of listing was fleeting. Once the token listed and the airdrop rewards ran dry, the token price and chain usage fell off a cliff. The projects and users who’d been chasing rewards turned their backs on Allchain the moment it stopped paying, and within a single year, 97% of the deposits had evaporated.

Allchain’s brutal ending wasn’t unique. The countless independent networks that had sprung up like mushrooms back then collapsed the same way. They’d lured development teams in with the sweet reward of incentives, but the moment the funding dried up, the ecosystem hollowed out in an instant, leaving nothing behind but silent, empty shells of infrastructure.

The astronomical fixed costs of running an independent chain were more than individual projects could bear. Unable to withstand the soaring infrastructure upkeep, the Allchains, one by one, declared they were shutting down and faded into history.

Only a select few survived capital’s cold scrutiny. The hundreds of chains that once looked ready to change the world carved up the ruins of a market share barely above 10%, then walked, without a sound, into extinction.

Back then we all thought we’d survive and build our own massive ecosystems…”

Back in 2026, people mistook the number of chains for blockchain scalability itself. But fragmented chains only broke the user experience apart and drove security costs through the roof. What people actually wanted wasn’t hundreds of complicated networks — it was a handful of massive, foundational infrastructures offering liquidity that would never crack, at optimized speed.

Do-hyun let out a long sigh, quietly closed his monitor, grabbed his bag, and headed home.

4. The “Human Eyes” That Used to Click Are Gone

The year 2036, A media startup office in Sangam-dong.

Jae-hoon happened to be browsing another platform when he saw a banner ad in the bottom right corner and laughed.

“There’s still a company out there sticking banner ads on their screen, waiting for readers.”

Jae-hoon was right. That platform’s daily visitor count was hitting new all-time highs every month, but the traditional banner ad revenue simply wasn’t coming, and that whole model of advertising had become a thing of the past.

Back in the early 2020s, when Jae-hoon first stepped into the media industry, the formula for the web economy was crystal clear. Write good articles, and readers came. Readers came, and advertisers paid to put up their banners.

“How many pageviews did we get today?”

This question, which opened the conference room every morning, decided whether a media outlet survived back then.

But that peaceful formula started to disappear in the late 2020s. As of 2029, more than half of all global web traffic began coming not from people but from AI agents and bots. AI would scrape an article and summarize it in a second flat — but machines simply didn’t have “eyes” to look at a banner ad.

At first, like most media companies, they blocked the bots. The server costs were exploding, and they simply couldn’t keep up. But blocking came at a brutal price. Buried entirely out of AI search and recommendation ecosystems, their brands were simply forgotten. Media companies faced an agonizing choice back then: block the bots and lose their traffic, or leave the door open and make no money.

“Who are we even selling our content to now?”

That desperate question filled the office. The answer wasn’t the ad board — it was putting a price on the content itself.

What opened the floodgates for change was the x402 standard, unveiled by Coinbase in May 2025. It resurrected, through technology, the HTTP 402 response code — the “Payment Required” signal — that had sat abandoned in a corner of the web standard for thirty years.

Up through 2029, the focus was on building foundational infrastructure: Know Your Agent (KYA) verification, settlement rails, and the like. The real explosion began in 2030, when one media company started selling data directly to AI through the x402 system. Once it proved out, other media and data companies wasted no time adopting x402 and jumped into data sales themselves.

At first there was plenty of mockery — pocket change, a few dozen won at a time, hardly worth the effort. But once hundreds of thousands, even millions, of machine calls piled up every day, real, substantial cash started landing in the account, far more than the old banner ad revenue ever brought in.

“No more worrying about what advertisers think — the machines pay full price, and the company runs on that.”

The old model of web advertising, catching human eyes to sell ads, slowly drew to a close, and the Machine Economy, where agents trade through APIs, moved into full swing.

Jae-hoon closed the dashboard and picked up his coffee cup. The visitor graph still traced that strange, near-vertical climb that made no sense by the old standards — but it’s just routine now. He doesn’t check how many people showed up. He checks how many AI agents paid today.

Tomorrow, hundreds of thousands of agents will knock on his server’s door again, and that honest line of transactions won’t be getting any shorter — not anymore.

🐯 More from Tiger Research

Read more reports related to this research.

• Payments 3.0 The AI Agent Payments Market

• 2026 Know Your Agent: Agent Identity Infrastructure

• Why AI + Blockchain Fails to Gain Traction in the Age of AI

• Take RWA Tokenization Offshore First

Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

Terms of Usage

Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn’t harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research’s reports, it is mandatory to 1) clearly state ‘Tiger Research’ as the source, 2) include the Tiger Research logo. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.

On July 22, 2026, SEC Commissioner Hester Peirce issued a statement titled "Headstands and Summervaults," identifying on-chain vaults and lending strategies as potential subjects of existing securities law. This report examines the parties likely to be affected and how the industry is responding.

Key Takeaways

• Applied broadly, the legal reasoning could extend beyond vaults and curators to discretionary products generally, a segment representing approximately $25.9 billion in TVL.

• The SEC is not targeting code that operates outside its reach. It is targeting the human actors who exercise discretion over that code.

• Teams building compliance-oriented DeFi protocols, including Steakhouse Financial and Maple Finance, have been anticipating and preparing for exactly this kind of regulatory attention.

• Historical precedent suggests that only two outcomes have proven durable: full registration under existing securities law, or the creation of new statutory exemptions through legislation.

• The responses currently available to market participants are, at best, interim measures. Only curators with sufficient capital to build post-action compliance infrastructure will retain their market position. Smaller curators without those resources will be displaced.

1. The SEC Is Targeting Discretion, Not Code

On July 22, 2026, SEC Commissioner Hester Peirce issued a statement titled “Headstands and Summervaults,” arguing that the Howey Test, the legal standard established by a 1946 Supreme Court decision, could be applied to on-chain vaults and lending strategies under existing securities law.

The Howey Test evaluates the economic substance of how capital is raised and managed. It does not require new legislation or regulatory rulemaking to be applied. It is a fact-based standard that has been consistently applied to new financial instruments regardless of their technical form. An on-chain vault or decentralized lending strategy, however sophisticated its blockchain architecture, could qualify as an investment contract under securities law if its structure satisfies the test’s three core criteria. When all three are met, the product is classified as a security.

The statement carries no immediate enforcement authority, as it reflects the view of a single commissioner. It is, however, the first instance in which the SEC Crypto Task Force’s developing framework has been mapped onto specific products, and it has prompted concern among relevant market participants.

MORPHO, the token of the vault infrastructure protocol Morpho, fell roughly 5% immediately after the announcement.

If this legal reasoning were to be applied in practice, the regulatory target would almost certainly not be the smart contracts that power the vaults. It would be the risk curators and the DeFi actors who exercise real discretion over how assets are deployed. The vault infrastructure that Morpho has built is a technical instrument for asset management. Code with no controlling party is not a natural subject of direct regulatory sanction.

2. Why Curators Are the Target

Curators determine how much capital is allocated across a vault and what level of risk that capital is exposed to. In that sense, they exercise genuine discretion over depositors’ assets. The vault itself is simply a tool through which curators manage those assets. Most vaults are built as smart contracts deployed without admin keys or upgrade permissions, meaning even the original deployer cannot halt their operation or alter their logic.

Financial regulation, as it has historically operated, presupposes the existence of an identifiable legal entity capable of receiving a subpoena, having assets frozen, or complying with a cease-and-desist order. Immutable code with no controlling party has no such administrator.

The regulatory consequence is that enforcement attention has moved from code to discretion. Earlier cases involving Tornado Cash and Uniswap Labs illustrate the pattern.

The Tornado Cash case turned on whether immutable code could constitute sanctionable property. The Uniswap Labs case asked whether the company operating a non-custodial interface had effectively functioned as an unregistered broker or exchange. Both cases focused on the legal status of code and the act of running a service. Neither reached the question of investment discretion as a basis for securities liability.

This case is different. The operative question is no longer who built the protocol but who selects which assets a depositor’s capital is exposed to, how much is allocated to each market, and how interest rate conditions and collateral parameters are adjusted to influence returns. Consider a curator that selects specific lending markets from a broader set, withdraws capital when risk rises, and shifts weight toward higher-yielding markets. Depositors place their capital with that curator because they trust its judgment, not because they trust the underlying smart contract. Returns and losses flow directly from the curator’s decisions. That pattern of professional discretion exercised on behalf of depositors is precisely what gives rise to the “expectation of profits from the efforts of others” that the Howey Test identifies as a defining feature of an investment contract.

The curator is the most clearly identifiable party exercising that discretion within the on-chain vault ecosystem. That is why it sits at the center of the regulatory frame.

3. Which Categories Fall Within Scope

If this legal reasoning is applied broadly, its reach does not stop at risk curators. The SEC’s analytical focus is on who is making investment decisions on behalf of users.

Liquid restaking operators decide which validators or actively validated services (AVSs) receive asset allocations. Yield aggregators compare returns and risk across lending and liquidity markets and move capital accordingly. On-chain asset allocation services adjust holdings and weights over time. Where a specific team or operator is making ongoing decisions about asset selection and reallocation, the function is materially similar to that of a curator.

The relevant scope is therefore wider than the vault product category alone. Whether any specific service falls within it depends on who, within that service, is selecting assets, changing allocations, and controlling exposure to loss. Aggregating potential exposure across categories defined by that criterion produces a total TVL of approximately $25.9 billion.

The legal standard is unlikely to be applied uniformly across all of these participants. Its intensity will vary with the structure of the discretion involved.

• At higher risk, where regulatory scrutiny would be most intense, are structures in which discretion is exercised opaquely in ways depositors cannot verify on-chain in real time, such as off-chain delegation and undercollateralized lending.

• At medium risk are standard vault curators and liquid restaking structures that exercise allocation discretion, with capital flows recorded transparently on-chain and constrained by governance mechanisms such as timelocks and guardian roles.

• At lower risk, and closest to compliance, are immutable protocol deployments with no controlling party, and financial products already registered under securities law.

The parties most accurately positioned to assess their own legal exposure are the operators themselves. This is why curators and adjacent market participants began developing tailored responses, including investor qualification restrictions, third-party compliance arrangements, and formal private placement exemptions, before the commissioner’s statement was issued.

4. Four Design Approaches to Reducing Regulatory Exposure

The responses developed to date do not resolve the underlying legal question. They are focused primarily on reducing the probability of regulatory application and limiting the legal liability of the operating entity.

Two analytical axes separate the approaches: whether a recognized legal exemption has been obtained, and whether actual asset allocation authority has changed. Measured against those criteria, the market’s current responses fall into four types.

1. Direct investor qualification: advance verification and sales restricted to accredited or qualified investors.

2. Established regulated distribution channels: routing through exchanges or regulated entities that have completed KYC on their users.

3. Collateral-level whitelisting: controlling permitted collateral assets through coordination with asset issuers.

4. Structural separation of permissioned lending and permissionless yield tokens: bifurcating institutional lending execution from retail-accessible yield exposure.

4.1 Investor Qualification: Grove and GLDY

The most direct way to reduce regulatory exposure is to control investor eligibility before any capital is accepted.

Steakhouse Financial launched Grove in June 2025 as an institutional-only on-chain capital allocation channel. Access is restricted to institutional RWA investors who have passed advance qualification screening.

Orca, in May 2026, partnered with Streamex Corp (Nasdaq: STEX) to open the GLDY pool for accredited investors only. GLDY is a yield-bearing tokenized security backed by physical gold reserves, issued explicitly under Regulation D, Rule 506(c), the private placement exemption under U.S. securities law. Investor accounts begin with on-chain transfers frozen and are unlocked only after passing Streamex’s KYC and accredited investor verification.

Both approaches target institutional and accredited investors, establishing a logical basis for using the private placement exemption without full public registration.

Investor qualification, however, does not neutralize a product’s characterization as an investment contract under the Howey Test. Accredited investor status is more directly relevant to the distribution path than to the question of whether a security exists in the first place. This is a practical risk-management approach within the current legal framework, not a fundamental change in legal character.

The curator’s core function of selecting assets and setting allocation weights within the vault remains unchanged, which is the structural limitation these access controls cannot address.

4.2. Existing KYC and Compliance Infrastructure: Sentora

Rather than building its own qualification framework, Sentora combines existing KYC-based distribution channels with regulated asset issuance infrastructure.

Kraken’s DeFi Earn product is the clearest example. Veda provides the vault infrastructure; Chaos Labs manages the Balanced and Boosted vaults; Sentora serves as risk manager for the Advanced vault, overseeing capital allocation across on-chain protocols and managing risk and liquidity.

This arrangement has since been adopted more broadly. Coinbase has combined Morpho and Steakhouse Financial to launch USDC lending through Prime and High Yield vaults. Binance has connected its users to Morpho vaults managed by Steakhouse and Gauntlet.

Exchange-level KYC confirms user identity, and issuer compliance frameworks support reserve and redemption structures. Neither addresses who is deciding which assets and markets receive how much capital. External compliance infrastructure reduces risk at the asset and distribution level but does not absorb the regulatory exposure or legal liability of the risk manager making allocation decisions.

4.3 Asset-Level Whitelisting: Aave Horizon

Aave launched Aave Horizon in August 2025 as an institutional RWA lending market. The product is structurally separated from the core protocol and designed to the specifications required for institutional asset management.

Aave Horizon’s distinctive design choice is to share control over permitted collateral with asset issuers rather than restricting user access directly at the distribution stage. Whitelists for tokenized collateral assets are managed by the issuers themselves: Circle, Ripple, Superstate, and Centrifuge (which includes Janus Henderson products). The protocol itself remains permissionless for any wallet holding whitelisted assets.

The governing control is not who accesses the market but which assets are eligible. Risk parameters follow recommendations from LlamaRisk, and collateral valuations are supported by NAV data verified by Chainlink in real time. Aave Horizon builds on existing Aave lending infrastructure rather than constructing a new chain or independent protocol.

Sharing verification responsibility with asset issuers does not extinguish Aave Horizon’s own legal and operational liability for its risk parameter decisions.

4.4 Structural Separation of Permissioned Lending and Permissionless Yield: Maple Finance

In April 2024, Maple Finance converted its entire platform to a whitelist structure. All loans are now fully overcollateralized, and Maple Direct, its in-house credit team, conducts borrower underwriting, ongoing monitoring, and margin calls directly. Access is limited to approved institutional borrowers and lenders.

The most notable aspect of Maple’s design is the separation between the permissioned lending operation and permissionless yield access. In 2024, Maple launched the Syrup protocol, through which retail users can deposit USDC without KYC and receive SyrupUSDC in return. Those deposits flow into the same institutional lending pool that Maple Direct already manages with its accredited borrowers. The lending itself operates under rigorous institutional compliance. The right to receive the yield that lending generates is packaged into a permissionless token and made available to any user.

This structure relocates regulatory exposure rather than eliminating it. Maple Direct’s underwriting and management discretion, including borrower selection, collateral terms, and margin calls, remains intact. The arrangement by which institutional lending returns are passed to SyrupUSDC holders generates its own question of whether that token constitutes an investment contract under the Howey Test, together with separate distribution liability.

The structural separation of permissioned lending and permissionless yield is a deliberate repositioning of where regulatory scrutiny lands. It does not change the legal liability of the entities managing the capital or the fundamental nature of the product.

The cases above address different regulatory contact points but share a common limitation. They are operational defensive structures designed to manage regulatory exposure by separating investors, assets, and distribution channels. They are not final solutions that extinguish legal risk.

Mapped against the two analytical axes introduced earlier:

• One approach has obtained an explicit legal exemption: the Orca/GLDY structure, which applies Regulation D, Rule 506(c) directly.

• The remaining approaches manage and constrain regulatory exposure: Grove, Sentora, Aave Horizon, and Maple Finance, through a combination of institutional qualification restrictions, third-party compliance infrastructure, and collateral whitelisting.

Restricting distribution and filtering eligibility does not resolve the underlying legal liability that attaches to a curator or protocol’s discretionary asset selection and allocation decisions.

5. What History Shows Works

The future of the on-chain asset management market will be determined not by the surface appearance of the code but by the institutional frameworks established to govern the scope of discretion, the transparency of disclosure, and the allocation of legal liability.

The measures examined above reduce immediate regulatory exposure and provide room to use existing private placement exemptions. They do not answer the foundational questions of what criteria govern a curator’s allocation decisions and who bears responsibility when losses occur.

The historical record is consistent on one point: access restrictions alone have not produced durable institutionalization.

• Closed-end funds in the 1920s and 1930s saw widespread abuse of “blind pool” structures in which managers did not disclose their investment targets. The Investment Company Act of 1940 resolved this not by restricting access but by institutionalizing the asset management function itself.

• In 2008, when the SEC determined that LendingClub’s peer-to-peer loan notes were securities, the company suspended new registrations and restructured as an issuer of SEC-registered notes tied to its loans, eventually listing publicly in 2014.

• In 2012, the crowdfunding industry’s demand for reduced fundraising restrictions led to the JOBS Act and the creation of Regulation Crowdfunding.

What the three cases share is that they did not stop at restricting investor access. They established the legal character of the product, the obligations of the operating entity, the scope of required disclosure, and the allocation of loss. Sustainable growth for new financial instruments requires that market participants be able to predict, in advance, both their rights and their legal responsibilities.

On-chain vaults and DeFi markets face the same institutionalization challenge. The available paths are:

• Full registration under existing securities law.

• Private placement exemptions targeting qualified investors.

• Immutable protocol design that eliminates discretion entirely.

• New regulatory exemptions specific to on-chain finance, such as those proposed to the SEC by Ava Labs and the Solana Policy Institute.

Whichever path is taken, the central task is the same: establishing who makes investment decisions, what disclosures are required, and where liability falls when outcomes are adverse.

6. Compliance Costs as a New Barrier to Entry

The factor that will ultimately determine competitive position in the on-chain asset management market is the capacity to absorb compliance costs structurally and to demonstrate legal accountability.

Because regulators cannot directly control code, the framework that holds human actors legally accountable for the discretion they exercise over it will only become more clearly defined. Regardless of how effectively a firm has positioned itself in the interim, formal registration or explicit exemption frameworks will eventually require every operator to demonstrate the legal basis for its management structure and the boundaries of its liability. At that point, compliance obligations, encompassing KYC infrastructure, legal review, on-chain asset valuation, bespoke institutional contracts, and loss-absorption structures, will cease to be administrative overhead. They will become an independent cost item requiring sustained capital investment.

The internalization of these compliance costs will drive a meaningful reordering of the curator market. Large curators with capital, operating scale, and established institutional relationships will be able to distribute compliance costs efficiently and consolidate their market position. Smaller curators, without the capital to fund independent infrastructure, will face a choice between bearing disproportionate costs and accepting consolidation into larger regulated protocols or distribution channels.

The real value of the grace period that interim strategies have secured will be determined by what is built during it. Those who use this time to design formal registration pathways, identify viable exemptions, and establish clear liability structures in advance will find that regulatory requirements become a source of competitive advantage rather than a barrier. For those who defer, mounting compliance costs will erode profitability and, ultimately, foreclose market participation.

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• Still 1990: Crypto Cards: $1.5 Billion a Month, but Not Yet Infrastructure

• The Crypto Market’s Shift: From Narrative to PMF

Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

Terms of Usage

Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn’t harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research’s reports, it is mandatory to 1) clearly state ‘Tiger Research’ as the source, 2) include the Tiger Research logo. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.

Headlines keep breaking about AI agents trading and handling payments on their own. Quietly, though, the crypto wallet industry had already been setting the stage. Right now, more than ten companies are building wallets built specifically for agents. What are they really after, and how big could the payoff be?

Key Takeaways

• When AI agents browse the internet in place of people and purchase goods or information, they end up making thousands of payments worth only a few cents each. Existing card rails cannot support payments this small, so a wallet that can automatically split and send funds according to preset conditions becomes essential.

• Companies such as Coinbase and Binance are building AI wallet infrastructure despite the lack of near-term revenue because doing so secures future customers before AI agents begin transacting at scale. The current phase is about establishing that base of users ahead of actual demand.

• A calculation based on Coinbase shows that rising AI agent usage could generate up to seven times its current revenue.

• Payment records accumulated in a wallet can show whether an AI agent is generating income, which opens the door to lending against future earnings, similar to extending credit to a small business based on its card sales history.

• This remains a stage of possibility rather than proof. AI agents still misfire and execute incorrect payments, rules vary by country and by company, and the legal standing of AI agents remains undefined. As a result, the competition underway is not about capturing revenue today. It is about establishing position years ahead of a market that is expected to take shape.

1. AI Agents Are Becoming Fully Active

Earlier this year, a widely discussed experiment on the prediction market Polymarket gave an AI agent $50 in seed capital and set it loose to trade autonomously, under the condition that it would cease to exist if it could not earn enough on its own to cover its API and server costs. The agent went on to trade successfully, and a range of other agents have since begun trading in similar fashion.

AI agents have yet to become part of everyday life. Still, it is clear that they will see widespread use in the near future.

2. Every Agent Transaction Starts With a Wallet

AI agents have not yet entered everyday payments. Their most active use today is in crypto trading bots operating within the crypto ecosystem, independent of traditional payment rails and focused specifically on crypto trading.

In the future, however, payment will extend to things not yet imaginable today. As covered in a previous report, AI changes the nature of payment itself. Once agents, rather than people, navigate the web directly, the size of individual payments falls sharply. A single API call or a single data query may cost as little as $0.001, or in extreme cases $0.00001.

Moving beyond current wallet usage, sending payments this small automatically, split according to preset conditions and without human involvement, requires a programmable payment system. This is the background behind the emergence of the x402 payment rail, and the wallet is the foundation on which that rail runs.

Current payment rails, however, are designed around people as the transacting party.

Cards are issued to an individual cardholder, run on a chargeback structure in which a person disputes and reverses a transaction when something goes wrong, and assume a fixed fee of tens of cents per transaction. None of this is a problem when a person makes an occasional $20 purchase, but the moment an agent starts sending thousands of payments a second, at $0.001 per API call or $0.00001 per data record, that payment model no longer works economically.

The central question is whether money itself is programmable.

Cards can automate the act of entering payment information, but they cannot be programmed to split, stream, or instantly settle the flow of money based on conditions. On the rails that wallets run on, that capability is the default. Storing payment details on a card only goes as far as executing a human-scale transaction on someone’s behalf. The moment the economy shifts to machines transacting directly with one another, the wallet becomes the only possible starting point.

3. Agents Are a $50 Billion Business

As the table shows, wallet providers span a wide range, from exchanges to stablecoin issuers. Why, then, are such a diverse set of players entering agent wallet infrastructure that carries no clear near-term profitability?

The answer is that these companies are positioning for future revenue and a future business, not today’s. Attaching agent functionality to a wallet now is not a revenue-generating move. It builds the underlying capacity to absorb transaction volume once agents begin generating large-scale activity.

The key point is that AI agents will eventually operate around the clock in a browserless environment, without human involvement. Consider a user who asks an agent to produce a piece of research. As the agent gathers information, it executes a small payment each time it pulls paid data from a different platform. A single instruction from the user can trigger 20 to 30 or more payments within moments.

A request that a person would see as a single, simple action turns into a large volume of payment transactions once it passes through an AI agent.

How this shift in the payment environment could affect corporate earnings can be estimated using Coinbase’s disclosed figures. The calculation uses Coinbase’s 9.2 million monthly transacting users (MTU) as the base, rather than its full base of roughly 120 million registered users.

Combining three variables, adoption rate, number of agents per user, and daily call frequency, produces the following scenario results.

• Conservative scenario (10% adoption, 1 agent per user, 50 calls per day): adds roughly $84 million in annual revenue, an increase of 1.2%.

• Neutral scenario (50% adoption, 2 agents per user, 200 calls per day): additional revenue rises sharply to about $3.36 billion, an increase of 46.8%.

• Aggressive scenario (100% adoption, 3 agents per user, 1,000 calls per day): annual revenue reaches roughly $50.37 billion, about seven times Coinbase’s current total revenue.

What stands out in this comparison is that the gap between the three scenarios widens geometrically rather than arithmetically. Adoption alone rises tenfold, from 10% to 100%, yet the resulting revenue gap widens roughly 600-fold, from $84 million to $50.37 billion.

Because the three variables, adoption rate, agents per user, and daily call volume, multiply together, even a small increase in any one of them produces an exponential rise in the total. As a result, once agents reach mass adoption and user numbers surge, the resulting revenue stream could reach up to about seven times current total revenue.

This is why Coinbase promotes agent wallet infrastructure even without meaningful revenue today. Doing so secures its share of the revenue that an agent-driven era is expected to generate.

4. Toward Agent Neobanking

Transaction data accumulated through wallet infrastructure amounts to more than a simple record. It provides a foundation for new business models, since payment history stored in a wallet can serve as a credit assessment standard that demonstrates an AI agent’s financial standing and performance.

Once this kind of data-driven credit assessment system is in place, wallet providers can extend naturally into next-generation financial services such as revenue-based financing (RBF) built specifically for agents.

Stripe Capital is a representative case of a company that built a new financial business successfully on top of existing payment data. When Stripe launched its lending service, Stripe Capital, in September 2019, it did not rely on outside credit bureaus or extensive loan paperwork. It assessed loan eligibility and limits using only the real-time sales data already flowing through its own payment network for each merchant.

The Stripe case suggests that a company can build a high-value financial business on top of a data pipeline from its existing operations, without a separate sales network or marketing effort.

Agent wallet providers are likely to follow the same expansion path. Steadily accumulating an agent’s revenue data through its wallet creates a basis for advancing operating funds through RBF and generating income as an agent-focused financial platform.

Building this new business line, however, depends on one condition. AI agents must evolve beyond simple payment execution into asset-holding entities that generate their own income, earning enough real revenue to repay what they borrow.

5. This Growth Remains Unproven

The sevenfold revenue growth projected for Coinbase and the expansion into RBF described above are optimistic scenarios that assume agent payments become widespread. The barriers to establishing this in the real economy are substantial.

First, significant questions remain about AI agents’ actual purchase conversion rates and payment reliability. Agents still misfire during autonomous ordering, producing incorrect payments due to hallucination, and payments are sometimes blocked outright when card issuers’ fraud detection systems (FDS) reject the transaction. Actual payment completion rates remain low as a result.

In addition, payment protocols such as x402, AP2, and MPP remain fragmented rather than converging on a single standard, and the absence of clear KYC (identity verification) and financial regulation for AI agents, which are not legal persons, is a further obstacle to market expansion.

The goal for wallet providers today, then, is not short-term fee revenue. It took Apple’s App Store fifteen years to build a $10 billion annual fee market, and it took WeChat Pay seven years to establish its large mini-program ecosystem. Agent wallets are following a similarly long timeline, building out an ecosystem rather than competing for immediate returns.

The competition underway is not about today’s marginal revenue. It is about which company first gains control over data on the flow of funds within the agent economy expected to take full shape five to ten years from now.

🐯 More from Tiger Research

Read more reports related to this research.

• Payments 3.0 The AI Agent Payments Market

• 2026 Know Your Agent: Agent Identity Infrastructure

• Circle Internet Group (CRCL): The Start of Full Vertical Integration

• Why AI + Blockchain Fails to Gain Traction in the Age of AI

• What AI Services Are Crypto Firms Offering?

Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

Terms of Usage

Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn’t harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research’s reports, it is mandatory to 1) clearly state ‘Tiger Research’ as the source, 2) include the Tiger Research logo. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.

In the first half of 2026, no single narrative ran through the entire market. Even so, stablecoins, RWA, meme tokens, DeFi, and prediction markets each survived or grew despite the downturn. This report looks at the 2026 crypto market as one that is no longer driven by a single narrative but is instead searching for product-market fit across a diversified set of sectors.

Key Takeaways

• A single narrative once pulled the whole market along. The market now moves according to genuine demand.

• Even in a depressed market, established sectors including stablecoins, DeFi, RWA, and meme tokens have continued to survive.

• In the end, only projects that find product-market fit and generate real revenue from real users will survive.

1. The Narrative-Driven Crypto Market of the Past

In the crypto market, narrative has been the central force that concentrates participant attention and pulls in liquidity. Sectors that drove major market cycles, such as DeFi Summer, were each given a distinct narrative, and the market has repeated a cyclical pattern in which liquidity moves to the next narrative as soon as the previous one fades.

At a broad level, the crypto market has passed through four major cycles in which a single narrative dominated the entire market:

• 2020: DeFi

• 2021: NFT/P2E/GameFi

• 2022: L1/L2 competition

• 2024: Restaking

Among narrative-driven growth stories, GameFi produced the most extreme outcome.

Major traditional game publishers including Square Enix and Ubisoft entered the space, and the gaming sector drew $2.5 billion in inflows in the first quarter of 2022 alone. But sectors that could not demonstrate real product-market fit did not last. Axie Infinity, the sector’s flagship title, saw its average monthly player count fall 99.7%, from a peak of 2.8 million in January 2022 to roughly 8,000 in May 2026. It is a clear example of how quickly a narrative built mainly on justification and capital can collapse.

2. The Narratives Consumed Last Year

As covered in our previous report, 2025 marked the peak of this pattern of narrative consumption. After the AI agent narrative, a new one emerged nearly every month, and the pace of rotation kept accelerating.

On the surface this looked highly wasteful, but it is hard to deny that this rapid churn of narratives was what kept retail investor attention engaged and, in doing so, became a core driver of the market as it stands today. Even so, the market’s underlying demand for these past narratives was directed at the token itself rather than at the problem the product was meant to solve.

3. Innovation in Supply Without Demand

One example illustrates how most past narratives developed.

A decentralized social media project appears, framed around the problem that existing platforms monopolize revenue and leave creators inadequately compensated. It presents a vision of lower fees and of returning content ownership and revenue to creators.

1. Token rewards: early participants receive token rewards, and as stories spread of people earning income simply by being active on the platform, market interest grows.

2. User inflow and expansion: similar projects follow, issuing tokens around a minimum viable product and drawing users in through airdrops and liquidity incentives, and the ecosystem’s market capitalization and trading volume expand quickly.

3. Stalled product development: the token price and the scale of rewards start to outpace the product itself. Once fundraising and the initial distribution are complete, development and user growth stall, and the original problem of creator compensation remains unresolved.

4. Liquidity exit: there was never a large enough user base that felt this problem acutely, and the capital that had flowed in was chasing price appreciation rather than the product, so once the narrative peaked, liquidity and users left just as quickly.

This pattern repeated across several narratives, and the market eventually came to recognize that innovation in supply without underlying demand carries little meaning. It began to confirm that only projects generating real revenue and holding onto a stable user base mattered, and it became clear that only projects demonstrating genuine product-market fit would survive.

4. 2026: The Era of PMF That Creates Demand

Where past narratives built and supplied solutions without underlying demand and tried to manufacture demand afterward, the PMF era works the other way around: products are built to match demand that already exists among customers. The market is moving toward genuine products in which user numbers and revenue grow alongside the product and the brand, rather than one in which only token market capitalization rises.

The five sectors covered here were selected based on three criteria: usage indicators such as trading volume and revenue over the first half of 2026, the trajectory of new players entering the space, and growth in market capitalization. These criteria matter because they are difficult to manufacture artificially, all at once and over a short period.

The sections below trace the problem each sector originally set out to solve and the direction in which its leading players are now expanding.

4.1. Stablecoins: From a Volatility-Free Payment Instrument to Cross-Border Settlement Infrastructure

Stablecoins are tokens pegged to the value of fiat currency and used as a means of payment and settlement. The category’s market capitalization stands at $304.2 billion, close to its all-time high of $321 billion.

• Tether(USDT): market cap of $184.08 billion, monthly settlement volume of $1.79 trillion (up 63% month over month), $10.2 trillion in cumulative settlement over the past 12 months, more than $10 billion in net income in 2025, and $141 billion in Treasury holdings.

• Circle(USDC): market cap of $73.25 billion, the default stablecoin across major exchanges such as Coinbase and institutional settlement channels.