Upbit, a cryptocurrency platform based in South Korea, has established itself as a major player in the country’s crypto market. Responsible for over 80% of the trading activity in South Korea, Upbit has also emerged as one of the top five exchanges globally in terms of trading volume. This level of dominance has raised concerns and criticisms, especially as South Korea prepares to implement new regulations to protect investors in the wake of the TerraUSD stablecoin collapse in 2022.
The upcoming regulations, set to be enforced under the Virtual Asset User Protection Act in July, will impose strict requirements on crypto exchanges. These measures include increasing reserves, enhancing investor protection, and monitoring suspicious transactions. The fear among industry experts is that these regulations could further solidify Upbit’s position as the market leader in South Korea, potentially widening the gap between larger exchanges like Upbit and smaller competitors.
Impact on International Exchanges
The regulatory challenges in South Korea have already affected international exchanges looking to enter the market. Singapore-based Crypto.com recently announced a delay in its launch in South Korea due to the need for additional communication with regulators. Reports of regulatory scrutiny and concerns about anti-money laundering practices have also deterred international exchanges from venturing into the Korean market. Smaller exchanges like Huobi Korea, Cashierest, and Coinbit have closed since the passing of the crypto law last June.
South Korea’s Continued Appetite for Crypto
Despite the regulatory landscape and challenges faced by exchanges, South Korea’s interest in cryptocurrencies remains strong. More than six million Koreans actively trade crypto, representing over 10% of the population. The won has also emerged as one of the most traded currencies against crypto-assets globally, indicating the country’s significant involvement in the crypto market. South Korea remains a hub of activity for crypto enthusiasts, with many individuals shifting their focus from traditional investments like stocks to cryptocurrencies.
Launched in 2017 by Dunamu Inc., Upbit has quickly become a key player in the global crypto market. Its trading volume has surged globally, reaching nearly 5% from 1.4% in January 2021. With backing from Kakao Corp. and Woori Technology Investment, Upbit achieved a peak valuation of $15.7 billion during the height of the pandemic. The exchange’s rapid growth and solid financial backing have positioned it as a dominant force in the South Korean and global crypto markets.
Upbit’s dominance in the South Korean crypto market, coupled with the upcoming regulatory changes, poses significant challenges for both local and international exchanges. The stringent requirements set to be enforced under the Virtual Asset User Protection Act could further solidify Upbit’s position as the market leader while potentially deterring smaller competitors. Despite the regulatory landscape, South Korea’s appetite for cryptocurrencies continues to grow, showcasing the country’s significant involvement in the crypto market. It remains to be seen how exchanges will navigate the evolving regulatory environment and maintain their competitive edge in the rapidly changing crypto landscape.
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