South Korea’s Financial Services Commission (FSC) has announced that they will be conducting an investigation into Upbit, the country’s largest cryptocurrency trading platform. This decision comes amid concerns about Upbit’s dominant position in the market, as reported by local media outlet einfomax on Oct. 10.
FSC Chairman Kim Byung-hwan confirmed the probe, stating that the agency will be looking into the virtual asset market’s reliance on Upbit. The move follows concerns raised by lawmaker Lee Kang-il regarding Upbit’s relationship with K Bank, South Korea’s first internet-only bank.
K Bank, which was launched in 2017, is reportedly gearing up for an Initial Public Offering (IPO) to raise around $731.64 million. Upbit remains the largest crypto exchange in South Korea by trading volume and has a significant influence on the broader Asian market.
Lawmaker Lee Kang-il brought attention to the fact that Upbit deposits make up nearly 20% of K Bank’s total deposits, amounting to 4 trillion won out of 22 trillion won. He expressed worries that any disruption in Upbit’s operations could lead to a bank run on K Bank. Lee also criticized K Bank for offering high interest rates of 2.1% on Upbit customer deposits, calling it unsustainable given the bank’s low-profit margins. He highlighted the close relationship between Upbit and K Bank, which he believes goes against the principle of separating finance and industry.
In response to these concerns, the FSC chief announced that K Bank’s listing process would undergo a thorough review. The Virtual Asset Committee, responsible for overseeing digital assets in South Korea, will also be investigating the matter.
This investigation comes shortly after Dunamu, Upbit’s parent company, K Bank, and BC Card signed a memorandum of understanding (MOU) to establish a cooperative digital financial services model. This collaboration aims to leverage Dunamu’s virtual asset trading platform, K Bank’s mobile banking infrastructure, and BC Card’s payment processing systems to drive the growth of South Korea’s digital financial ecosystem.
Overall, the FSC’s investigation into Upbit and its relationship with K Bank underscores the regulatory scrutiny facing the cryptocurrency industry in South Korea. As the market continues to evolve, it will be essential for key players to adhere to regulatory guidelines and ensure transparency in their operations.