Upbit, a leading cryptocurrency platform in South Korea, has established itself as a dominant player in the country’s crypto market. Responsible for over 80% of the trading activity in South Korea, Upbit has also been ranked among the world’s top five exchanges in terms of trading volume. However, the platform’s dominance has raised concerns and criticisms, especially as South Korea prepares to implement new regulations aimed at protecting investors in the wake of the TerraUSD stablecoin collapse in 2022.
The upcoming regulations, set to be enforced in July under the Virtual Asset User Protection Act, are expected to impose stringent requirements on cryptocurrency exchanges. These requirements may include measures to increase reserves, enhance investor protection, and monitor suspicious transactions. There are concerns that these regulations could further solidify Upbit’s position as the primary leader in the Korean market, potentially creating more barriers for smaller competitors to enter the market.
Nam HyeonJoon, a spokesperson for Bithumb, South Korea’s second-largest trading platform, has highlighted the challenges presented by the new regulatory framework. Compliance with the regulations would require substantial capital and manpower, making it difficult for smaller exchanges to keep up with the new standards. CEO of Hashed, Simon Seojoon Kim, expressed similar concerns, pointing out that well-resourced exchanges like Upbit may have an advantage in meeting the regulatory requirements, further widening the gap between market leaders and smaller players.
The regulatory challenges have not only affected domestic exchanges but also international platforms looking to enter the Korean market. Singapore-based Crypto.com recently announced a delay in its planned launch in South Korea, citing the need for further communication with regulators. Reports of regulatory scrutiny and concerns about anti-money laundering practices have caused hesitance among international exchanges, signaling a more stringent regulatory environment in the Korean crypto market.
Despite the regulatory landscape and challenges faced by exchanges, South Korea’s appetite for cryptocurrencies remains strong. More than six million Koreans, representing over 10% of the population, actively trade crypto assets, with the won emerging as one of the most traded currencies against cryptocurrencies globally. The country continues to be a hub of crypto activity, with individuals like Ho Chan Chung, head of marketing at Korean analytics firm CryptoQuant, shifting their investments from stocks to crypto assets.
Launched in 2017 by Dunamu Inc., Upbit has quickly risen to become a key player in the global crypto market. According to CCData, Upbit’s trading volume has surged globally, reaching nearly 5% from 1.4% in January 2021. Backed by Kakao Corp. and Woori Technology Investment, Upbit achieved a peak valuation of $15.7 billion during the pandemic, solidifying its position as a leading cryptocurrency exchange in South Korea and beyond.
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