South Korea’s Fair Trade Commission Intensifies Scrutiny of Major Cryptocurrency Exchanges Amid Regulatory Calls

Title: South Korea’s Fair Trade Commission Cracks Down on Major Crypto Exchanges Amid Regulatory Shift

Seoul, South Korea – The Fair Trade Commission (FTC) is ramping up scrutiny of the nation’s leading cryptocurrency exchanges, signaling a potential shift towards stricter regulatory oversight akin to that faced by traditional financial institutions. This move comes in response to increasing public demand for accountability in the rapidly evolving crypto market.

On Wednesday, FTC investigators descended on the headquarters of Bithumb, the second-largest crypto exchange in South Korea, amid allegations of false advertising regarding its liquidity claims. In press releases from March and April of last year, Bithumb touted itself as having the highest liquidity among local exchanges. However, data from crypto aggregator CoinGecko reveals that Upbit, operated by Dunamu, dominated the market with a staggering 68% share of trading volume, while Bithumb lagged behind at 28%.

The FTC is now probing whether Bithumb violated local advertising laws, which prohibit deceptive marketing practices. “Any firms that post exaggerated ads are subject to sanctions for undue business practices,” a spokesperson for the FTC stated. Bithumb officials have refrained from commenting on the ongoing investigation.

Dunamu, the operator of Upbit, is also under FTC investigation for allegedly restricting rival platforms from trading its unlisted stocks. The company’s Stockplus platform is currently the sole venue for transactions of its stocks, raising concerns about unfair trading practices. An official from Dunamu declined to provide further details on the investigation.

This heightened scrutiny reflects the South Korean government’s commitment to tightening regulations on quasi-financial companies, especially as crypto exchanges currently evade the stringent oversight that traditional financial institutions face. The explosive growth in earnings for major exchanges has intensified calls for a more robust regulatory framework. Dunamu reported a net profit of 239 billion won ($163 million) in the third quarter of last year, marking a staggering 308% increase from the previous year. Bithumb also saw its net profit soar to 105.4 billion won, a jaw-dropping 3,285% rise.

Despite the FTC’s proactive stance, some experts argue that South Korea should adopt a more progressive approach to crypto regulation, similar to that of the United States. “In the U.S., major tech companies are issuing stablecoins, and there is a general openness to embracing the new financial paradigm driven by cryptocurrencies,” said Kim Dae-jong, a professor of business administration at Sejong University. “Korea should pursue a longer-term approach rather than sticking to a regulation-first stance.”

As the landscape of cryptocurrency continues to evolve, the actions of the FTC may set a precedent for how digital assets are regulated in South Korea, potentially reshaping the future of the industry in the region.