South Korea’s Crypto Giant Upbit Under Regulators’ Microscope

Key Takeaways

• Upbit faces regulatory scrutiny over its market dominance.
• Lawmakers worry that Upbit’s influence over K-Bank’s operations could lead to a bank run.
• South Korea’s top financial regulator has pledged to investigate Upbit’s ties to K-Bank.

South Korea’s top financial regulator has launched an investigation into Upbit, the country’s top cryptocurrency exchange, amid concerns of monopoly.

With an 80% market share, Upbit has raised eyebrows among lawmakers who worry that the exchange has become too big. The concerns have only grown further as its banking partner, K-Bank, is set to go public.

Upbit’s Monopoly Could Lead to Bank Run

During a National Assembly audit on Oct. 10, Democratic Party of Korea lawmaker Lee Kang-il expressed concerns about Upbit’s market monopoly and its relationship with K-Bank, citing the potential for a bank run.

As the largest virtual asset exchange in Korea and the second-largest spot crypto trading platform globally, Upbit’s grip on the market has raised eyebrows.

According to Rep. Lee, the exchange’s dominance is closely tied to its partnership with K-Bank, which has seen Upbit deposits swell to 4 trillion won or 20% of the bank’s 22 trillion won in total deposits.

Moreover, Rep. Lee pointed out that K-Bank’s operating profit margin hovers below 1%, while it offers a relatively high 2.1% interest rate on Upbit customers’ deposits. This, he argued, “violates the principle of separation of finance and industry” and could have far-reaching consequences.

With K-Bank preparing to go public, lawmakers worry that Upbit’s significant influence over the bank’s operations could lead to a bank run in unfavorable circumstances if Upbit transactions were to be suspended.

Fsc To Investigate Upbit’s Partnership With K-Bank

Financial Service Commission (FSC) chairman Kim Byung-hwan assured the ruling party’s lawmakers that the agency knows the Upbit structural problem and will thoroughly examine the partnership between the two entities.

In response to lawmakers’ concerns, Chairman Kim pledged that the FSC will conduct a comprehensive review of K-Bank’s listing criteria through the Virtual Asset Committee, a specialized task force overseeing virtual asset trading.

While acknowledging that K-Bank’s listing review has been sufficiently scrutinized, Chairman Kim emphasized that the agency will take a closer look at the partnership to address the latest concerns. “We will review the matter comprehensively through the Virtual Asset Committee,” he said.