South Korea’s Financial Services Commission (FSC) has started an investigation into the increasing dominance of the country’s crypto market by Upbit, one of the world’s largest crypto exchanges by trading volume. This move shows growing concern over Upbit’s control over the sector.
During the National Assembly’s State Audit on October 10, Democratic Party Representative Lee Kang-il raised concerns about Upbit’s growing dominance, especially after its partnership with K-Bank. He pointed out that the collaboration has significantly boosted Upbit’s market share and could potentially threaten K-Bank’s stability if the exchange were to face operational difficulties.
K-Bank, which is preparing for an initial public offering (IPO), currently holds a substantial portion of Upbit’s customer deposits, amounting to 4 trillion won, or 20% of the bank’s total deposits. Representative Lee warned of the risk of a potential bank run, stating that disruptions in Upbit’s operations could severely impact K-Bank.
Furthermore, Lee criticized the financial arrangement between the two entities, highlighting that despite the bank’s profit margins being less than 1%, K-Bank offers a 2.1% interest rate on Upbit customer deposits. He claimed that this violated the principle of separating financial and industrial interests.
In response, FSC Chairman Kim Byung-hwan acknowledged the issue and confirmed that a comprehensive investigation into K-Bank’s listing and its relationship with Upbit would be conducted by the Virtual Assets Committee. Upbit has stated its commitment to regulatory compliance, having already implemented measures to prevent insider trading and adhering to the Virtual Asset User Protection Act (VAUPA).
This investigation adds to the uncertainty in the cryptocurrency market, which is already under pressure. Bitcoin has seen a decline of 1.81% in the past 24 hours, falling below $61,075, and other altcoins have also experienced drops ranging from 2% to 10%. Investors are reminded of a similar investigation in 2018 that shook the market after allegations of fraud were leveled at Upbit’s management, leading to significant market turbulence.
The outcome of the investigation could have far-reaching implications for both Upbit and K-Bank, with potential ripple effects on the broader crypto market.
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