Users can earn interest! South Korea’s Bithumb deposit usage fee is higher than the benchmark interest rate and is under review
In South Korea, this is called a "deposit usage fee." After the exchange collects the user's legal currency deposit, it will pay interest to the user at a fixed time.
After the implementation of the Virtual Asset User Protection Act, fee competition among exchanges began to heat up. Upbit raised the originally announced 1.3% to 2.1%, Bithumb raised it from 2.0% to 2.2%, and Korbit followed suit and raised it to 2.5%. Bithumb went a step further and announced on the afternoon of the 23rd that it would increase the originally announced 2.2% rate to 4.0%, which is higher than the Bank of Korea’s base interest rate deposit rate: 2.1% (3.5%) per year, allowing the FSC to convene an emergency review meeting.
According to Korean regulatory regulations, "deposit usage fees" should be reasonably calculated based on the exchange's operating income and incurred costs. However, the FSC believes that Bithumb's method of adding bank interest to its own funds to pay usage fees does not comply with regulations.
Bithumb fee decision sparks controversy
Bithumb’s rates consist of an annual interest rate of 2.0% generated by the operation of the real-name account partner bank NH Nonghyup Bank, plus an additional 2% annual interest rate paid by Bithumb.
However, questions have been raised about whether such rates are reasonable. According to Article 5 of the "Virtual Asset Industry Supervision Provisions", virtual asset operators should establish reasonable deposit usage fee calculation standards and pay deposit usage fees based on this standard. Ultimately, Bithumb reversed its decision to increase its rates to 4%.
FSC urgently summons exchanges
The FSC convened the heads of the five major virtual asset exchanges (Upbit, Bithumb, Coinone, Korbit, Gopax) on the morning of the 24th to re-examine the calculation method of deposit usage rates. The authorities believe that exchanges have different views on what constitutes a reasonable fee rate and the calculation standards need to be reaffirmed.
During this meeting, the exchange reported to the authorities on which banking products deposits were operated through and how deposit usage rates were calculated.
A person related to a virtual asset exchange said: "Although fee calculation is the inherent authority of the exchange, it also actively negotiates with banks and submits relevant information to the Financial Supervisory Service."
Upbit’s interest payment example
Deposit rate: 2.1% per year, deposit fees are paid to KYC members residing in South Korea
Deposit fees incurred during the previous quarter will be paid every 3 months (January, April, July and October)
Deposit fees will be paid to the Upbit account less the amount of withholding tax (15.4%)
自 2024 年 7 月 19 日起收取使用費
FSC will actively monitor exchange rate policies
The FSC stated that it will continue to pay close attention to the rate competition of virtual asset exchanges and ensure that deposit usage rates are within a reasonable range. This action aims to maintain market order and protect the interests of investors.
In the future, with the further implementation of the Virtual Asset User Protection Law, each exchange will need to handle fee issues more carefully to avoid unnecessary market fluctuations and regulatory risks.
Experts say: The current policy is a bit paradoxical
Lian News interviewed Jake, founder of South Korea’s Whitewater Labs, and said: “I think the current regulations are a bit strange, but the focus of the new interest rate policy is that users’ assets are now considered liquid assets. Previously, these assets were considered cold assets, so Exchanges do not need to pay interest. But now, since these assets are considered liquid assets but the exchange still has no control over them, the exchange needs to pay an opportunity cost for holding user assets.”
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reprinted with permission from: Lian News
