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South Korea’s Financial Services Commission plans to investigate Upbit over concerns about its market dominance and its close ties with K Bank.
A local media <a href="https://fsc.go.kr/eng/pr010101/82534?srchCtgry=&amp;curPage=&amp;srchKey=&amp;srchText=&amp;srchBeginDt=&amp;srchEndDt=" target="_blank" rel="noopener noreferrer nofollow">report</a> cited FSC chairman Kim Byoung-hwan, stating that the country’s top financial regulator will thoroughly investigate the <a href="https://crypto.news/south-korean-exchanges-double-market-share-in-2023/" target="_blank" rel="noopener noreferrer nofollow">concentration of power</a> in South Korea’s crypto market, focusing on Upbit’s market monopoly.
The FSC chairman’s remarks came during an Oct. 10 parliamentary session, during which Democratic Party lawmaker Lee Kang-il raised concerns about the risks associated with a single entity accounting for such a large market share.
Upbit is South Korea’s largest crypto exchange and the fifth largest globally by 24-hour trading volume. As of June 2024, the platform accounted for roughly 80 percent of the country’s cryptocurrency market share and a customer base of over 8 million users, according to <a href="https://www.statista.com/topics/8488/cryptocurrency-in-south-korea/#:~:text=A%20few%20providers%20such%20as,began%20regulating%20the%20overheated%20market." target="_blank" rel="noopener noreferrer nofollow">data</a> from Statista.
Lee alleges that Upbit’s dominance grew after it partnered with K Bank, a domestic digital bank. He also raised concerns about K Bank’s upcoming IPO, highlighting the risks tied to its heavy reliance on Upbit’s deposits.
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According to Lee, the concentration of Upbit’s deposits in K Bank reportedly amounts to 4 trillion won or about 20% of the bank’s total deposits of 22 trillion won. He warned that if Upbit transactions were disrupted, it could lead to a “bank run” 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 Byoung-hwan acknowledged these concerns, adding that the Virtual Assets Committee, which is responsible for monitoring the cryptocurrency market, would conduct a comprehensive review of Upbit’s dominance and K Bank’s role in supporting it.
South Korea has <a href="https://crypto.news/south-korean-regulators-focus-on-otc-crypto-market/" target="_blank" rel="noopener noreferrer nofollow">increased its oversight</a> of the crypto sector in recent years with the government implementing strict anti-money laundering measures and investor protection policies. Regulators also <a href="https://crypto.news/south-korea-implements-new-rules-to-safeguard-crypto-users-against-exchange-failures/" target="_blank" rel="noopener noreferrer nofollow">introduced</a> the Protection of Virtual Asset Users in June, <a href="https://crypto.news/crypto-exchanges-in-south-korea-now-required-to-hold-80-of-assets-in-cold-storage/" target="_blank" rel="noopener noreferrer nofollow">mandating</a> VASPs to hold at least 80% of users’ digital assets in cold storage with credible financial institutions.
Further, the Financial Supervisory Service, the executive arm of the FSC, has also established a real-time monitoring system in collaboration with cryptocurrency exchanges.
Chairman Kim, meanwhile, has maintained a cautious approach to banks engaging with the crypto sector. Earlier this year, he <a href="https://crypto.news/south-korea-fsc-corporate-crypto/" target="_blank" rel="noopener noreferrer nofollow">warned</a> of the risks involved with allowing bank accounts for corporate use in crypto transactions, citing the need to prioritize investor protection measures.&nbsp;
Read more: <a rel="noopener noreferrer nofollow" href="https://crypto.news/south-koreas-largest-pension-fund-injects-33-75-million-in-microstrategy-shares/"> South Korea’s largest pension fund injects $33.75 million in MicroStrategy shares </a>

South Korea’s largest crypto exchange Upbit to be probed by the FSC

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