As a seasoned financial analyst with over two decades of experience in the global markets, I have seen many cases of market dominance and their potential consequences. The ongoing investigation into Upbit, South Korea’s largest crypto exchange, is no exception. The concerns raised by FSC chairman Kim Byoung-hwan about Upbit’s market monopoly and its ties with K Bank are valid and warrant a thorough examination.
The Financial Services Commission of South Korea intends to scrutinize Upbit, as it raises questions about the company’s monopolistic influence in the market and its strong relationship with K Bank.
According to reports from a local news source, the chairman of the Financial Services Commission (FSC), Kim Byoung-hwan, announced that the nation’s financial regulator will conduct an extensive probe into the centralization of power in South Korea’s cryptocurrency market. The investigation will specifically examine Upbit’s dominance as a monopoly within this market.
During a parliamentary meeting on October 10th, the chairman of the FSC made his comments as Democratic Party legislator Lee Kang-il expressed worries regarding the potential dangers stemming from one company holding such a considerable portion of the market.
Upbit, based in South Korea, is the country’s leading crypto trading platform and ranks fifth worldwide by daily trading volume. By June 2024, it controlled approximately 80% of the Korean cryptocurrency market and boasted a user base exceeding 8 million, as per Statista’s data.
Lee suggests that following its partnership with K Bank, a local digital bank, Upbit’s influence significantly increased. Moreover, he voiced worries regarding K Bank’s impending Initial Public Offering (IPO), pointing out potential dangers due to their heavy dependence on Upbit’s deposits.
As per Lee’s statement, approximately 20% of K Bank’s overall deposits, which amounts to 4 trillion won, is allegedly held by Upbit. He cautioned that any interruption in Upbit transactions might potentially trigger a “rush on the bank” at K Bank.
The lawmaker also questioned K Bank’s decision to offer a 2.1% interest rate on Upbit deposits, especially considering the bank’s operating profit margin is under 1%.
Kim Byong-hwan addressed these concerns, mentioning that the Digital Asset Committee, tasked with overseeing the cryptocurrency market, will carry out a thorough investigation into Upbit’s market influence and K Bank’s involvement in its support.
Over the past few years, South Korea has tightened its control over the cryptocurrency industry by enforcing stringent anti-money laundering regulations and investor protection guidelines. The government has also required regulators to implement the Protection of Virtual Asset Users in June, which demands that Virtual Asset Service Providers (VASPs) store at least 80% of their users’ digital assets in cold storage with reliable financial institutions.
Additionally, the Financial Supervisory Service, acting as an arm of the FSC, has jointly developed a continuous surveillance system along with cryptocurrency trading platforms.
In contrast, Chairman Kim has consistently adopted a measured stance towards banks interacting with the cryptocurrency industry. Recently, he expressed concerns about the potential hazards of providing corporate bank accounts for crypto transactions, emphasizing the importance of safeguarding investors by implementing robust protective measures.
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2024-10-10 10:47