The South Korean government, through its Financial Services Commission (FSC), plans to investigate the Upbit monopoly structure. The recent market dominance by Upbit has caused concerns especially after the firm partnered with K-Bank, a digital bank, which is planning to go public soon. The partnership has paved way to massive changes in the virtual asset market and shifting of deposit systems in K-Bank while posing threats to the financial system.
During a National Assembly audit, Lee Kang-il, the Democratic Party leader, indicated that Upbit, which is now the second largest cryptocurrency exchange, has a large share of the South Korean cryptocurrency market and added that the exchange’s influence expanded after its partnership with K-Bank.
Lee highlighted the financial connection between the two companies. Out of K-Bank’s total deposits of 22 trillion Won, Upbit accounts for 4 trillion Won, or 20%. He warned that any disruption in Upbit’s operations could trigger a bank run on K-Bank. Such a scenario could create instability in the banking sector, as Upbit’s deposits make up a large share of K-Bank’s reserves.
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The lawmaker also questioned the terms of cooperation, which stated that K-Bank provides a 2.1% interest rate to Upbit’s customers. He pointed out that this agreement is good for Upbit but creates a burden on K-Bank, a company with a profit margin of less than 1%. Lee also pointed out that this relationship undermines the policy of a clear separation between finance and industry.
Chairman Kim acknowledged the issue. He assured lawmakers of a thorough review. He added that K-Bank’s IPO had been carefully reviewed. Kim said the FSC would examine the situation comprehensively through the Virtual Asset Committee.
The investigation comes at a critical time for Upbit and K-Bank. The crypto market faces rising regulatory scrutiny worldwide, and K-Bank’s IPO could draw attention to its ties with Upbit. Lawmakers and regulators alike are concerned about the impact of these business partnerships on South Korea’s financial stability.
