East Asia’s crypto market is no longer moving as one bloc. New regional data shows a fragmented landscape where South Korea is trading artificial intelligence-linked tokens at scale, Hong Kong is pulling in institutional capital, Japan’s retail users are quietly moving on-chain, and China’s stablecoin activity is expanding despite official restrictions.
The region’s overall crypto economy contracted modestly between July 2025 and June 2026, in line with the global bear market. But the headline decline masks sharp differences between markets. South Korea remained the region’s largest crypto economy at US$449.1 billion, followed by Japan at US$228.3 billion, Hong Kong at US$192.2 billion, China at US$176.3 billion, and Taiwan at US$140.4 billion.
Also Read: Taiwan’s stablecoin moment: Why the NTD could outshine the dollar
For Southeast Asian founders, exchanges and regulators, the message is clear: crypto adoption is increasingly shaped by local market structure rather than broad regional sentiment. Tax policy, licensing, capital controls, retail culture and institutional access are now producing very different outcomes across Asia.
As Daniel Kim, CEO of Tiger Research, put it, “Asia is that rare region with both grassroots retail depth and institutional firepower.”
South Korea turns the AI trade into a crypto trade
South Korea’s crypto economy grew 12.3 per cent during the period, helped by an additional US$51.1 billion in exchange-related flows. Unlike Hong Kong, where institutions drive much of the activity, Korea’s market remains heavily retail-led.
That matters because Korean retail investors have a long record of chasing high-conviction, high-volatility themes. In equities, the country’s AI trade has centred partly on SK Hynix, whose memory chips are critical to data centres. In crypto, the same appetite has spilled into tokens linked to AI projects and infrastructure.
By June 2026, AI-related cryptocurrencies were the most popular thematic category in won-denominated trading volume, surpassing payment tokens such as XRP. This made South Korea a global outlier. AI-crypto trading reached only 0.91 per cent of yen-denominated activity in June 2026, while the equivalent share in won was 19.5 times higher.
The names changed quickly. Worldcoin led with US$7.41 billion in volume, followed by SAHARA at US$3.2 billion, VIRTUAL at US$2.7 billion, BIO at US$2 billion and NEAR at US$1.7 billion.
The turnover suggests Korean traders are not simply buying a sector and holding it. They are rotating rapidly through whichever token best captures the current AI narrative.
Also Read: Japan shows how non-USD stablecoins complement USDC and USDT
Korea’s regulatory environment has helped sustain that retail dominance. Crypto profits remained untaxed during the study period, although a delayed 22 per cent tax is scheduled to begin in 2027. At the same time, corporate participation is only gradually opening up after long-standing restrictions.
Francis Kang, Executive Director of Korea Blockchain Week, described institutions as being in “preparatory mode”, with major banks and securities firms running pilots around stablecoins, tokenisation and custody. If the tax is implemented while corporate access expands, Korea’s market could begin shifting from retail momentum to a more balanced structure.
Japan’s retail market is more active than it looks
Japan is often viewed as an institution-first crypto market because of its strict licensing regime and the growing role of banks and financial firms. Yet the data points to a more active consumer base than that reputation suggests.
The country recorded a US$228.3 billion crypto economy during the period. Decentralised exchanges, or DEXs, accounted for nearly 35 per cent of Japan’s service activity, the highest share among mature centralised-exchange markets in East Asia. DEX activity has risen more than 200 per cent since 2022, while centralised-exchange activity has been broadly flat.
Much of this is happening in smaller, retail-sized transactions. About 65.7 per cent of Japanese retail DEX swaps were in the US$10 to US$1,000 range. Roughly one in four users who withdrew funds from exchanges operating in Japan later deposited into decentralised finance protocols.
Taishi Sato, CEO of DeFimans, a subsidiary of SBI, said the most visible activity is in perpetual futures, a type of derivative contract with no expiry date. He linked this to Japan’s large base of foreign-exchange traders, who are already used to hedging macro exposure.
Still, tax has been a major brake. Japanese crypto traders faced a maximum marginal rate of 55 per cent during the study period. Reforms advanced in July 2026 could shift eligible gains towards separate taxation of about 20 per cent. If implemented, that could bring more retail volume onshore and into regulated venues.
For Southeast Asia, where retail crypto participation is high but tax treatment remains uneven, Japan’s case is worth watching. A clearer, lighter regime could show whether tax reform moves users back into compliant platforms rather than offshore or peer-to-peer channels.
Hong Kong builds the institutional layer
Hong Kong’s crypto economy, at US$192.2 billion, is defined less by retail speculation and more by its role as an institutional settlement hub.
Also Read: Nearly half of Asia Pacific consumers open to stablecoins within five years, Visa says
Institutional platforms, including over-the-counter desks, custodians and market makers, captured 16 per cent of Hong Kong’s service inflows during the period, up from around nine per cent two years earlier. No other East Asian market exceeded six per cent.
The city drew nearly US$24 billion in inbound service-to-service transfers, around six times Japan’s figure and 44 times South Korea’s. Outbound flows reached about US$11 billion, suggesting Hong Kong is functioning as a two-way corridor for institutional capital.
This is the result of policy design. Hong Kong has made stablecoins, tokenised finance and central bank digital currencies part of its financial strategy. It issued its first stablecoin licences in 2026 and has moved into market testing with institutional players.
For Singapore and other Southeast Asian financial centres, Hong Kong’s trajectory is a direct benchmark. Both cities want to attract serious digital-asset businesses without reopening the excesses of the last crypto cycle. The lesson so far is that institutional money appears willing to move into markets where licensing is strict but workable.
China shows prohibition does not erase demand
China remains the hardest market to measure because crypto services are officially banned. Even so, the report estimates its crypto economy at no less than US$176.3 billion.
Unlike its neighbours, China’s activity is dominated by peer-to-peer flows rather than exchanges. Domestic peer-to-peer activity accounted for 59.1 per cent of the country’s all-in crypto economy, a 3.5-fold increase in share over the prior period.
Stablecoins appear to be central to this shift. The number of unique wallets sending peer-to-peer stablecoin transactions grew 43-fold between the first quarter of 2024 and the second quarter of 2026. China’s self-custodied stablecoin holdings also turned over 33.2 times a year, more than three times the global average of 9.3 times.
That high velocity suggests stablecoins are being used less as a store of value and more as working capital or payment rails. The report notes a possible link with the expansion of China’s social credit system into finance and the internet in March 2025, though the relationship remains a hypothesis rather than proven causation.
The broader takeaway is familiar across emerging markets, including parts of Southeast Asia: when users face friction in formal financial channels, crypto activity may not disappear. It may simply move into less visible peer-to-peer networks.
Also Read: SEA’s stablecoin boom has a dollarisation problem nobody’s pricing in
East Asia now offers four different crypto futures at once. Korea shows the power and risk of retail narratives. Japan shows how tax can suppress an otherwise sophisticated user base. Hong Kong shows institutional capital following regulatory clarity. China shows the limits of prohibition.
For Southeast Asia, the question is no longer whether crypto adoption will continue, but what kind of adoption its rules will encourage.
The post East Asia’s crypto market splits as Korea bets on AI tokens and Hong Kong courts institutions appeared first on e27.