South Korea’s Financial Services Commission to Investigate Upbit’s Market Dominance and Ties with K Bank

South Korea’s Financial Services Commission (FSC) is set to launch an investigation into Upbit, the country’s largest cryptocurrency exchange, over concerns about its market dominance and close ties with K Bank, a domestic digital bank.

FSC chairman Kim Byoung-hwan announced the probe during a parliamentary session on Oct. 10, following concerns raised by Democratic Party lawmaker Lee Kang-il about the risks associated with a single entity controlling a significant portion of the crypto market.

Upbit currently holds roughly 80% of South Korea’s cryptocurrency market share and boasts a customer base of over 8 million users, making it the fifth largest exchange globally by 24-hour trading volume. The exchange’s dominance reportedly grew after partnering with K Bank, with Upbit deposits accounting for 20% of the bank’s total deposits.

Lee Kang-il highlighted the potential risks of this close relationship, warning of a possible “bank run” at K Bank if Upbit transactions were disrupted. He also questioned the bank’s decision to offer a high interest rate on Upbit deposits despite its low operating profit margin.

In response to these concerns, Chairman Kim stated that the FSC’s Virtual Assets Committee would conduct a thorough review of Upbit’s market dominance and K Bank’s role in supporting it. South Korea has been ramping up its oversight of the crypto sector in recent years, implementing strict anti-money laundering measures and investor protection policies.

The FSC has also established a real-time monitoring system in collaboration with cryptocurrency exchanges to ensure compliance with regulations. Chairman Kim has emphasized the need for caution when it comes to banks engaging with the crypto sector, citing the importance of prioritizing investor protection measures.

The upcoming investigation into Upbit and K Bank reflects South Korea’s commitment to maintaining a fair and transparent cryptocurrency market while safeguarding the interests of investors. Stay tuned for updates on this developing story.