During a state audit conducted by the National Assembly’s State Affairs Committee on October 10, Financial Services Commission (FSC) Chairman Kim Byung-hwan announced plans to scrutinize Upbit’s dominance in South Korea’s virtual asset market.
This statement came in response to concerns raised by Democratic Party lawmaker Lee Kang-il regarding the concentration of market power around the exchange. Lawmaker Lee pointed out the significant market share held by Upbit, which is not only the largest cryptocurrency exchange in South Korea but also ranks second globally.
According to Asian reports, he attributed the excessive centralization of the market to the partnership between Upbit and K Bank, suggesting that this collaboration has contributed to the platform’s monopoly-like control.
Potential Risks for K Bank Amidst Upbit’s Dominance
Further concerns were raised about K Bank’s dependency on Upbit’s deposits as the bank approaches a planned initial public offering (IPO). Lee revealed that Upbit, which recently integrated Pendle, deposits account for 4 trillion won, representing nearly 20% of K Bank’s total 22 trillion won in deposits, potentially posing risks for the bank.
The lawmaker warned of a possible bank run scenario should Upbit transactions face disruption, given the substantial portion of K Bank’s deposits tied to the exchange. He also questioned the sustainability of K Bank’s financial practices, noting that the bank, which has an operating profit margin below 1%, currently offers a 2.1% interest rate on deposits from Upbit customers.
Such arrangements, Lee argued, may infringe upon the principle of separating financial and industrial interests. In response to these concerns, Chairman Kim indicated that the review of K Bank’s IPO has been thorough, and the issues raised will be assessed in detail by the Virtual Asset Committee. He assured that the committee would take a holistic approach in addressing the relationship between Upbit and K Bank and evaluating its implications for the broader financial market.