2024-04-30
Upbit, a South Korean cryptocurrency platform, is responsible for the majority of the country's trading activity and has positioned itself as one of the top five global exchanges in terms of trading volume, as per Bloomberg reports.
Last year, Upbit's customers accounted for almost 20% of the total deposits from its major banking partners.
However, the dominance of Upbit has raised concerns and received criticism, particularly as South Korea prepares to implement new regulations to protect investors following the collapse of the TerraUSD stablecoin in 2022.
These upcoming regulations, known as the Virtual Asset User Protection Act, will be enforced in July and will impose strict requirements on cryptocurrency exchanges.
These requirements include increasing reserves, implementing measures to protect investors, and monitoring suspicious transactions.
The concerns mainly revolve around the possibility that these regulations could further solidify Upbit's position as the unrivaled leader in the Korean market.
Bithumb, the second-largest trading platform in Korea, voiced the challenges presented by the new regulatory framework.
They emphasized the significant capital and manpower necessary for compliance.
Simon Seojoon Kim, the CEO of Hashed, a venture capital firm based in Korea, echoed these sentiments and highlighted that well-funded exchanges like Upbit may find it easier to meet the new standards, potentially widening the gap between market leaders and smaller competitors.
The regulatory obstacles have already affected international exchanges seeking to enter the Korean market.
Crypto.com, based in Singapore, recently announced a delay in its planned launch in South Korea due to the need for further communication with regulators.
This decision was prompted by reports of regulatory scrutiny and concerns surrounding anti-money laundering practices.
Since the passing of the crypto law in June last year, smaller exchanges such as Huobi Korea, Cashierest, and Coinbit have closed down.
Analyst Min Seung Kim from Korbit Research expects Upbit to effortlessly comply with the new regulations, noting that competition is increasingly concentrated on the leading exchange.
Despite the regulatory landscape, South Korea's interest in cryptocurrencies remains robust.
Over six million Koreans, representing more than 10% of the population, actively engage in cryptocurrency trading.
Additionally, the Korean won is emerging as one of the most widely traded currencies against crypto-assets globally.
The country continues to be a vibrant hub of activity for crypto enthusiasts.
Upbit, launched in 2017 by Dunamu Inc., has rapidly become a significant player in the crypto market.
According to CCData, its global trading volume has surged to nearly 5% from 1.4% in January 2021.
Supported by Kakao Corp. and Woori Technology Investment, Upbit reached a peak valuation of $15.7 billion during the pandemic.
