South Korean regulators to investigate Upbit's market dominance

South Korea’s Financial Services Commission (FSC) has announced plans to investigate the monopoly structure of the country's cryptocurrency market, which is heavily dominated by the Upbit exchange.

FSC Chairman Kim Byung-hwan confirmed during a national assembly meeting that the agency will examine Upbit’s influence and its partnership with local bank K-Bank.

Legislator Lee Kang-il raised concerns about Upbit’s dominant position in the market, attributing much of its influence to its close partnership with K-Bank.

According to a local media report on October 10, K-Bank holds a significant portion of Upbit’s deposits, which has raised concerns about financial stability.

Lee noted that Upbit accounts for roughly 20% of K-Bank’s deposits, which total approximately 22 trillion KRW ($16.3 billion).

He warned that if Upbit’s transactions were interrupted, it could lead to a bank run on K-Bank.

Lee also questioned whether it was sustainable for K-Bank, with a profit margin of less than 1%, to offer 2.1% interest on Upbit customer deposits.

He argued that the partnership between Upbit and K-Bank could violate the principle of separating finance from industry.

In response, FSC Chairman Kim stated that the IPO review of K-Bank has been thorough and that the situation involving Upbit will be comprehensively reviewed by the Virtual Asset Committee.

The investigation comes amid broader efforts by South Korea’s Ministry of Strategy and Finance to implement stricter regulations on stablecoins.

Upbit has grown significantly since its establishment in 2017, recording a daily trading volume of $1.2 billion, according to CoinGecko.

During the market peak in March 2024, its trading volume surged to $15 billion.

Upbit controls roughly 80% of South Korea’s crypto trading, while Bithumb, the country’s second-largest exchange, handles around $700 million in daily volume.