The South Korean Financial Services Commission (FSC) has announced an investigation into the market monopoly structure surrounding Upbit. It is the largest cryptocurrency exchange in the country. Upbit also holds the title of the world’s second-largest spot cryptocurrency exchange. Its dominance in the market grew significantly after forming a business partnership with K-Bank, which is preparing for an initial public offering (IPO).
FSC Chairman Kim Byung-hwan said that the commission has understood the monopoly issues and will review the matter. He made the remarks when contributing to a discussion at a National Assembly’s State Affairs Committee session on October 10. Kim responded after Lee Kang-il, a Democratic Party lawmaker, questioned Upbit market control.
Lee noted that Upbit market power grew after partnering with K-Bank. He pointed out that Upbit deposits account for 20% of K-Bank total deposits. This equals about 4 trillion won out of the bank’s 22 trillion won. According to Lee, if Upbit shuts its doors, it may lead to a bank run on K-Bank because it has provided a significant amount of credit for the exchange.
Lawmaker Warns of Potential Bank Run on K-Bank Due to Upbit Market Power
The lawmaker also criticised K-Bank for giving higher interest rates on Upbit customers’ deposits and said, K-Bank operating profit margin is less than 1%. He pointed out that investing at 2.1% returns Upbit deposit raises questions regarding the relationship between Upbit and K-Bank, seemingly violating the division between finance and industry.
In response, FSC Chairman Kim said that the committee’s concern is an IPO problem and that this issue has been discussed in detail. He said that the Virtual Asset Committee will review the issue more thoroughly to effectively regulate and control the situation.
The probe into Upbit market dominance occurs when South Korea is stepping up its regulation of the cryptocurrency sector. As K-Bank prepares its IPO, the links between the bank and Upbit will remain one of the main regulatory concerns. The findings of this investigation could directly affect the development of the cryptocurrency market and influence South Korea’s banking industry.
