South Korea’s Financial Services Commission (FSC) has announced an investigation into potential monopoly concerns in the country’s cryptocurrency market. This move is a significant blow to Upbit, the world’s second-largest spot cryptocurrency exchange, which is already facing mounting pressure as Bitcoin and Ethereum prices have dropped by 2.3%. The added regulatory scrutiny could bring even more challenges to the market.
Upbit and K-Bank Partnership Under Scrutiny
During a National Assembly inspection on October 10, Democratic Party lawmaker Lee Kang-il raised concerns over the growing monopoly in South Korea’s crypto space, particularly pointing to Upbit’s dominance. In response, FSC Chairman Kim Byung-hwan acknowledged these concerns, stating, “We are aware of the issue with Upbit’s monopoly structure.” Lee further emphasized how Upbit’s partnership with K-Bank has strengthened its market control. He noted that 20% of K-Bank’s 22 trillion won deposits, approximately 4 trillion won, come from Upbit-related deposits.
Lee warned that this close relationship could pose a risk, especially with K-Bank’s upcoming initial public offering (IPO). “If Upbit transactions are halted, it could cause a bank panic at K-Bank,” Lee cautioned. He also questioned the financial regulations surrounding K-Bank’s decision to offer a 2.1% interest rate to Upbit customers, especially considering the bank’s operational margin is below 1%. Lee argued that this close connection violates the principle of separating finance from industry.
In response, FSC Chairman Kim stated, “I believe the reviews for K-Bank’s IPO are thorough enough. We will comprehensively examine the issue through the Virtual Assets Committee.”
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Upbit’s Regulatory Measures
Despite the scrutiny, Upbit has taken steps to align with regulatory standards. In July, the exchange implemented measures to prevent insider trading in compliance with the Virtual Asset User Protection Act (VAUPA). These regulations are seen as significant steps toward ensuring Upbit operates within local and global legal frameworks. However, the growing regulatory pressure and monopoly accusations are causing uncertainty among investors.
Current State of the Crypto Market
The crypto market continues to face intense selling pressure. Bitcoin’s price has retreated from the $65,000 mark this week, dropping by 2.5% in the past 24 hours, falling below $61,000. In 2018, Upbit’s executives faced fraud charges, which contributed to a market crash at the time. Today, Upbit’s global market dominance is even greater than it was in 2018, making any potential developments critical for investors.
Investors are also awaiting the release of the U.S. September Consumer Price Index (CPI) data. The market is currently pricing in the possibility of a 50-basis point interest rate cut in November. In the meantime, the selling pressure in the altcoin market is increasing, with leading altcoins losing around 2% in value.
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