Upbit, a South Korean-based cryptocurrency platform, is responsible for over 80% of the country's trading activity, making it one of the world's top five exchanges by trading volume.
Upbit customers were responsible for nearly one-fifth of total deposits from its large banking partners last year, Bloomberg reported.
Upbit's dominance raises concerns
Upbit's dominance has drawn criticism and concern, especially as South Korea is moving toward enacting new laws aimed at protecting investors following the collapse of the TerraUSD stablecoin in 2022.
The next regulation, scheduled to take effect in July under the Virtual Asset User Protection Act, will impose strict requirements on virtual currency exchanges, including measures such as increasing reserves, strengthening investor protection, and monitoring suspicious transactions. become.
This concern stems from concerns that these regulations could cement Upbit's position as the undisputed leader in the Korean market.
Nam HyeonJoon, a spokesperson for Bithumb, South Korea's second-largest trading platform, highlighted the challenges posed by the new regulatory framework, citing the large amount of capital and human resources required for compliance.
Simon Seojun Kim, CEO of South Korea-based venture capital firm Hashed, echoed similar sentiments, saying that well-funded exchanges like Upbit will meet the new standards. He pointed out that this could widen the gap between market leaders and smaller competitors.
Regulatory challenges are already impacting international exchanges seeking to enter the Korean market. Singapore-based Crypto.com recently announced the postponement of its launch in South Korea, citing the need for further communication with regulators.
The decision comes after concerns were raised over its anti-money laundering practices, which were reportedly under regulatory scrutiny.
Since the Cryptocurrency Law was passed in June last year, small exchanges such as Huobi Korea, Cashierest, and Coinbit have been shut down. Min Seung Kim, an analyst at Corbit Research, said he expects Upbit to be able to easily meet the new regulations, noting that competition is increasingly concentrated among top exchanges.
South Korea's virtual currency boom
Despite the regulatory environment, South Korea’s appetite for cryptocurrencies shows no signs of slowing down. More than 6 million Koreans, representing more than 10% of the population, are actively trading cryptocurrencies, and the won has emerged as the most traded currency for cryptoassets worldwide.
The country remains a hotbed of activity for cryptocurrency enthusiasts. “I used to invest more in stocks, but now I invest everything in cryptocurrencies,” said Ho Chan Chun, head of marketing at South Korean analytics firm CryptoQuant.
Founded by Dunamu Inc. in 2017, Upbit quickly became a major player in the cryptocurrency market. The company's global trading volume soared to nearly 5% from 1.4% in January 2021, according to CCData. Backed by Kakao and Wooli Technology Investments, Upbit reached its highest valuation of $15.7 billion during the pandemic.
