Upbit, a cryptocurrency platform based in South Korea, is responsible for over 80% of the country’s trading activity and has become among the world’s leading five exchanges in terms of trading volume.
According to a Bloomberg report, Upbit’s customers were responsible for nearly a fifth of the total deposits from its major banking partners last year.
Upbit’s Dominance Sparks Concerns
Upbit’s dominance has drawn criticism and concerns, particularly as South Korea moves to enact new legislation aimed at protecting investors following the TerraUSD stablecoin collapse in 2022.
The upcoming regulations, set to be enforced in July under the Virtual Asset User Protection Act, will impose strict requirements on crypto exchanges, including measures to increase reserves, enhance investor protection, and monitor suspicious transactions.
The concerns stem from the fear that these regulations could cement Upbit’s position as the undisputed leader in the Korean market.
Nam HyeonJoon, a spokesperson for Bithumb, Korea’s second-largest trading platform, highlighted the challenges posed by the new regulatory framework, citing the substantial capital and manpower required for compliance.
Simon Seojoon Kim, CEO of Hashed, a Korea-based venture capital firm, echoed these sentiments, noting that well-resourced exchanges like Upbit may find it easier to meet the new standards, potentially widening the gap between market leaders and smaller competitors.
The regulatory challenges have already affected international exchanges eyeing entry into the Korean market. Singapore-based Crypto.com recently announced a delay in its planned launch in South Korea, citing the need for further communication with regulators.
The decision came after reports of regulatory scrutiny, with concerns raised about anti-money laundering practices.
Since the crypto law passed last June, smaller exchanges like Huobi Korea, Cashierest, and Coinbit have closed. Analyst Min Seung Kim from Korbit Research expects Upbit to easily meet new regulations, noting that competition is increasingly focused on the top exchange.
South Korea’s Crypto Craze
Despite the regulatory landscape, South Korea’s appetite for crypto shows no signs of decreasing. More than six million Koreans, representing over 10% of the population, actively trade cryptocurrencies, and the won is emerging as the most traded currency against crypto-assets globally.
The country remains a hotbed of activity for crypto enthusiasts. “I invested more in stocks before, but now I’m all in crypto,” remarked Ho Chan Chung, head of marketing at Korean analytics firm CryptoQuant.
Launched in 2017 by Dunamu Inc., Upbit has quickly become a key player in the crypto market. According to CCData, its trading volume globally has surged to nearly 5%, up from 1.4% in January 2021. Backed by Kakao Corp. and Woori Technology Investment, Upbit reached a peak valuation of $15.7 billion during the pandemic.
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