Domestic ecosystem pales in comparison to virtual asset boom… Promising blockchain companies exodus overseas

Amid the stir in the U.S. blockchain industry due to former President Donald Trump's pro-cryptocurrency policy, South Korean blockchain companies are showing a contrasting picture. Leading blockchain startups that were once considered promising with large-scale investment inflows are now scaling down their domestic operations and turning their eyes to overseas markets.

According to the industry on the 17th, blockchain technology company Haechi Labs has recently downsized its organization to around 10 people and has begun restructuring its business organization. A Haechi Labs official said, "We are financially healthy," but "as the demand for B2B business has significantly decreased in Korea, Haechi Labs has reorganized its existing business and started restructuring." In the process, some C-level and other key personnel have also resigned. He said, "The system has been transformed, such as shifting from regular employment to outsourcing."





Haechi Labs, founded in 2018, provides corporate clients with essential solutions for the Web3 ecosystem, such as a virtual asset wallet solution PayFeel and a Web3 security audit service. The company grew by generating operating profits without issuing virtual assets and raised about 12 billion won in a Series A round in 2022, with a valuation of over 200 billion won. Anticipating a surge in demand for blockchain technology from domestic companies, the company ambitiously launched corporate services and hired a large workforce, but the market forecast did not materialize, leading to a bitter experience.

As the institutional conditions are not supported, the number of companies actually pursuing Web3 business in Korea has decreased significantly. In fact, major conglomerates like SK Telecom (SKT) have recently been backing off from the Web3 field. An industry official said, "There are hardly any 'golden' companies left among Korean companies," and "Most of the startups that promised to create all kinds of crypto-related applications have gone out of business."



In contrast, the blockchain and cryptocurrency industry is thriving in the U.S. under former President Trump's pro-cryptocurrency policy stance. Coinbase, the largest U.S. cryptocurrency exchange, announced that it will add 1,000 more employees in the U.S. thanks to Trump's policies. U.S.-based cryptocurrency projects like Solana, Ripple, and Cardano, which Trump has designated as strategic reserve assets, are also gaining attention. Grayscale, a cryptocurrency asset manager, is expanding its influence in the market by launching various exchange-traded funds (ETFs) one after another.



In this situation, Korean blockchain companies are turning their eyes to overseas markets as a strategy for survival. Haechi Labs is also targeting overseas markets for its new business under consideration. This is not just Haechi Labs' problem. Zangle, which raised 17 billion won in a Series B investment round in 2022, has recently abandoned its ERP business targeting Korean companies and is accelerating the preparation of services targeting overseas markets.

Some companies are even moving their base to regions with a crypto-friendly regulatory environment. Nexon's blockchain subsidiary Nxpace, Kakao's blockchain subsidiary Klaytn, and the joint venture Kaia DLT Foundation of Line Next have all established a presence in Abu Dhabi. HashID, a leading Korean blockchain venture capital (VC), has also joined this trend by expanding to Abu Dhabi. Abu Dhabi is emerging as a new hub for global blockchain companies, providing a clear regulatory framework and tax benefits.

An industry official said, "At this point, even if you want to do a virtual asset business in Korea, you can't issue virtual assets, issue stablecoins, or do security token offerings (STOs), and there's nothing you can really do," and "With the airway blocked, companies have no choice but to turn their eyes to overseas."

Meanwhile, there are growing voices in the industry that Upbit, the largest cryptocurrency exchange in Korea, should play a greater role in nurturing the Korean blockchain ecosystem. An industry official said, "Most of the market liquidity is absorbed into Upbit through trading fees, but the funds absorbed are not being recycled back into the market to create a virtuous cycle," and stressed the need for structural reforms to build a healthy blockchain ecosystem.

Reporter Yeri Do

yeri.do@sedaily.com