South Korea’s Financial Services Commission recently stated that it will investigate the monopoly issues of cryptocurrency exchange Upbit. Upbit, one of the top ten cryptocurrency exchanges in the world, began to cooperate with K-Bank in June 2020 and became Upbit's designated bank. It not only promoted K-Bank's user growth, but also became one of the main choices for local cryptocurrency investors. 1.
This incident was caused by a large amount of K-Bank's deposits coming from Upbit's user funds. Although the cooperation between the two parties can promote the flow of market funds, it also brings risks such as stability, concentration and compliance, which has attracted great attention from the Korean Financial Commission. , has also triggered discussions in the industry on whether financial institutions and technology companies need to be separated.
Source: News1 K-Bank relies too much on Upbit for capital flow and may have concentration risks
The Korean Financial Commission stated that with the expansion of cooperation between Upbit and K-Bank, Upbit’s suspected monopoly in the Korean crypto market has become increasingly obvious. It also added that 20% of K-Bank’s deposits are user funds from Upbit, which means that K-Bank relies heavily on Upbit's capital flows. If Upbit encounters a major crisis one day, K-Bank will be the first to bear the brunt, which may trigger serious financial problems.
Upbit deposit interest exceeds K-Bank’s net profit, financial committee members question rationality
South Korean lawmakers questioned whether K-Bank’s net profit is about 1% but it offers 2.1% interest on Upbit’s deposits.
He added that the cooperation between K-Bank and Upbit may also violate South Korea’s “separation of industry and finance” principle and pose a risk to the stability of K-Bank.
In response, the South Korean Financial Committee responded that K-Bank had undergone a comprehensive review before listing, but the Financial Committee will further examine the potential risks caused by such cooperation through the Cryptocurrency Committee to ensure financial stability. Upbit has yet to respond to this incident.
(Note: The principle of separation of industry and finance means that industry and finance should be separated. The policy will set a cap on industry shareholding in the financial industry to avoid improper control of financial institutions, endanger financial neutrality, and avoid conflicts of interest.)
(Korean exchanges’ fiat interest rates are too high! Financial regulators urgently summon Upbit, Bithumb and other exchanges to review “deposit usage fees”)
This article is the Korean version of the Silicon Valley banking crisis! Upbit and K-Bank were investigated by South Korea’s Financial Services Commission first appeared on Chain News ABMedia.