In South Korea, just over a month has passed since a seismic regulatory measure was introduced, effectively shutting down most of the nation’s crypto exchanges, leaving just four fully functioning trading platforms standing. And despite the carnage of late September, analysts say the industry is now “stable.”
Official figures vary on just how many crypto exchanges were up and running at the start of 2021, but many regulators agreed that the number was around 66, over half of which closed down on or before September 24, when the Financial Intelligence Unit (FIU)’s grace period for license applications expired.
To gain a license, trading platforms were told to meet a vast range of protocols, including obtaining information security management system (ISMS) certification from a government agency and real-name banking service contracts from domestic financial providers. Those gaining just ISMS approval were allowed to continue offering crypto-to-crypto services, with only banked exchanges allowed to provide fiat on/off ramps.
Only the “big four” exchanges (Upbit, Korbit, Bithumb, and Coinone) managed to secure such contracts, and thus far the FIU has only approved the first two of these exchanges’ applications. Bithumb and Coinone’s applications are still pending approval or otherwise as the FIU examines their documents, and have been allowed to continue operating provisionally until a decision is forthcoming.
But per the Segye Ilbo, a crypto bloodbath never really emerged – due to the fact that the industry’s big fish have simply swallowed up the competition’s customers. Traders appear to have flooded to Upbit, in particular, sensing that the fate of most medium-sized platforms may have already been sealed.
Indeed, the platform now has what the media outlet called a “monopoly”: The latest industry figures show that the firm now has almost 9 million customers and has cornered “over” 80% of the market.
The media outlet noted:
“[Rival] exchange users whose platforms closed their doors or stopped trading in won before and after the [September 24 deadline] mainly moved [their coins and fiat] onto Upbit, which intensified the concentration of business on its platform.”
The fate of 27 exchanges and 13 wallet operators, all of which filed applications (crypto-to-crypto only barring Coinone and Bithumb) to the FIU remain in the balance, as the “stable” new reality sets in – a reality where one monolithic exchange towers over the competition.
Overseas exchanges with strong presences in the East Asia region – the likes of Binance and Bybit – have pulled back from South Korean trade, allowing Upbit to deepen its hold on the market.
The Segye Ilbo quoted an unnamed crypto industry official as stating that Upbit’s runaway success may be due in part to its highly lucrative partnership with the neobank K-Bank, the brainchild of the telecoms giant KT Telecom. The official was quoted as saying:
“It is highly likely that users of the closed exchanges were mainly driven toward Upbit. K-Bank, which has a real-name account partnership with Upbit, is an internet bank. So it is the easiest place to open an account.”
During the coronavirus pandemic, getting an appointment at a brick-and-mortar bank in order to set up an account has proved troublesome for many. K-Bank’s 100% telephone and app-based interface, however, has proved a boon to “contact-free” customers.
Trading volume on Upbit: