Nikolas Sargeant
South Korea's Financial Services Commission (FSC) announced on October 10 its intention to investigate Upbit, the country's leading cryptocurrency exchange, due to concerns over its market dominance.
Upbit's significant control over the crypto market has raised alarm among lawmakers who fear the platform's growing influence. This concern intensified following Upbit's partnership with K Bank, which has fueled the exchange's rapid expansion.
Upbit-K Bank Alliance Draws Regulatory Attention
FSC Chairman Kim Byung-hwan stated that the agency is aware of potential monopoly issues surrounding Upbit and will thoroughly examine its relationship with K Bank to ensure regulatory compliance.
The investigation was prompted during a National Assembly audit when Democratic Party lawmaker Lee Kang-il highlighted Upbit's market dominance. Rep. Lee revealed that Upbit's deposits at K Bank have reached 4 trillion won, accounting for 20% of the bank's total deposits.
This concentration of deposits from a single source raises concerns about financial stability and potential risks to the banking system. Lee also pointed out that K Bank offers a high 2.1% interest rate on Upbit customer deposits, despite having an operating profit margin below 1%.
K Bank's Crypto-Centric Strategy and IPO Plans
K Bank has been Upbit's primary banking partner since at least 2021. Reports suggest that up to 70% of K Bank's deposits are linked to cryptocurrency, raising questions about deposit stability in the event of market disruptions or security breaches.
While Upbit has maintained a strong security record since a major breach in 2019, the ongoing threat of hacking remains a concern for the industry.
Adding to the complexity, K Bank recently filed for an initial public offering (IPO) in Seoul, aiming to raise $3.7 billion. This would mark the largest South Korean listing in nearly three years, highlighting the significance of the bank's crypto-centric strategy.
