Upbit’s Market Power in South Korea Attracts Regulatory Flak

South Korea’s Financial Services Commission (FSC) announced plans to investigate Upbit’s market dominance. This investigation follows concerns about Upbit’s ownership in the virtual asset sector and its association with K-Bank, an internet-based bank preparing for an initial public offering (IPO).

Concerns Raised Over Upbit and K-Bank Relationship

During a National Assembly state review, FSC Chairman Kim Byung-hwan addressed concerns raised by lawmaker Lee Kang-il. Lee expressed worry that Upbit has gained significant market control through its alliance with K-Bank.

This partnership has resulted in a large portion of K-Bank’s deposits coming from Upbit customers. Lee noted that Upbit accounts for approximately 4 trillion won (around 20%) of K-Bank’s total deposits of 22 trillion won.

Lee also warned that any disruption in Upbit’s operations could lead to a bank run on K-Bank, potentially threatening financial stability. He pointed out the bank’s low operating profit margin of less than 1%, raising questions about the financial arrangements.

Lawmaker Questions K-Bank’s Interest Rates and Legal Compliance

Additionally, Lee questioned the sustainability of K-Bank offering a 2.1% interest rate on deposits from Upbit customers. He suggested that this arrangement might violate South Korea’s separation of finance and industry laws.

In response, Chairman Kim acknowledged the potential risks and confirmed that the FSC will conduct a full investigation. He assured the National Assembly that K-Bank’s IPO has undergone a thorough review, but the relationship between K-Bank and Upbit needs further scrutiny.

Upbit Expands into Singapore

Despite the regulatory concerns in South Korea, Upbit is expanding its global presence. The company recently received in-principle approval (IPA) from the Monetary Authority of Singapore (MAS) for a Major Payment Institution (MPI) license.

Read also: South Korea Probes Upbit, Exchanges Under New Crypto Laws

This approval will enable Upbit to offer crypto payment services in Singapore, strengthening its international presence in the digital asset space.