Upbit currently controls a significant share of the crypto market, raising concerns among lawmakers who believe the platform may be too powerful. These concerns have been heightened by Upbit’s partnership with K Bank, which has accelerated the exchange’s rapid growth.
Upbit and K-Bank Partnership Draws Additional Attention
According to a report by local news outlet Einformax, FSC Chairman Kim Byung-hwan said the agency is aware of potential monopoly issues surrounding Upbit and will closely investigate its ties to K-Bank to ensure compliance with regulatory standards.
The focus on Upbit came during the National Assembly audit on the same day that Democratic Party lawmaker Lee Kang-il expressed concern about Upbit’s dominance in the cryptocurrency market.
Lee revealed that Upbit’s deposits at K-Bank had grown to 4 trillion won, accounting for 20% of the bank’s total deposits of 22 trillion won. The growth has solidified Upbit’s market leadership and raised concerns about its financial stability.
Such a large accumulation of deposits from a single source could create an imbalance in the banking system, potentially exposing the bank and its customers to increased risks. Lee stressed that despite K-Bank’s operating profit being less than 1%, the bank offers a high interest rate of 2.1% on Upbit customers’ deposits. He argued that this violates the principle of separation of finance and industry, an important part of South Korea’s regulatory system to prevent conflicts of interest.
According to Lee, the close relationship between Upbit and K-Bank could undermine these protections, leading to possible financial instability. Kim acknowledged these concerns and said the agency would address the issue under the newly passed Electronic Financial Transactions Act, which took effect on September 15.
K-Bank’s Business Model and Upcoming IPO
K-Bank has been Upbit’s key banking partner since 2021. However, the partnership has raised questions, especially amid local media reports that up to 70% of K-Bank’s deposits are in cryptocurrency.
This heavy reliance on digital assets raises concerns about the stability of customer deposits, especially if the market were to experience a crisis, such as a run on funds or a major hack on Upbit.
While Upbit has maintained a high level of security since 2019, when a major hack cost the exchange around $49 million, the threat of hacking remains a real one.