A recent report revealed that the South Korean exchange Upbit dominates the local cryptocurrency market by more than 80%. Additionally, Upbit rose to fifth place on the list of top five global exchanges.
Various platforms have unsuccessfully challenged the dominance of the stock exchange in the country, and the upcoming regulatory framework has affected them.
Upbit enters the list of the top five global cryptocurrency exchanges
Bloomberg News Media mentioned On Upbit's latest achievements after it surpassed the Korean market. The ruling Korean Stock Exchange accounts for more than 80% of the country's trading volume.
Upbit, the largest cryptocurrency exchange in South Korea, accounts for more than 80% of the country's trading volume. The exchange has become one of the five largest exchanges in the world in terms of trading volume, coming close to Coinbase – BBG pic.twitter.com/f5jzHTBPIP
– Nekoz (@NekozTek) April 25, 2024
Notably, Upbit's level of dominance has not been achieved by other exchanges over any prominent crypto hub. According to official figures cited by Bloomberg, more than 6 million Koreans, about 10% of the population, traded cryptocurrencies in the first half of 2023.
The increase in trading volume during this rise pushed the stock exchange to fifth place among global stock exchanges. Upbit's daily trading volume of $2.84 billion matches Coinbase's $2.86 billion.
According to the report, South Korea's exchange transactions accounted for nearly a fifth of its banking partners' total deposits last year. Likewise, altcoins account for 80% of the trading volume of Korean exchanges, while global platforms record a much smaller volume, at 50%.
Despite the looming shadow of the $40 billion collapse of Do Kwon and Terra Labs, the Korean market continues to grow and become a market with “the most die-hard crypto traders with a taste for high-risk, high-reward tokens” in the world.
Moreover, recent reports revealed that the South Korean Won surpassed the US Dollar as the leading currency for cryptocurrency trading globally in the first quarter of 2024. This rise indicates the massive appeal and growing popularity of cryptocurrencies among South Koreans.
As a result, upcoming election campaigns attempted to appeal to voters, with candidates promising to work on regulations and taxes.
Does the new regulatory framework favor Upbit's dominance?
South Korean regulators will implement the Virtual Asset User Protection Act in July 2024. The new regulatory framework will implement stricter requirements and consequences for exchanges, including the possibility of life imprisonment for criminal acts.
Furthermore, operators must “take steps to fulfill obligations” after breaches or system failures. The requirements require “significant capital and manpower,” according to Nam Hyun Joon, spokesman for Korea's second-largest stock exchange, Bithumb.
The new regulatory landscape was designed to “protect investors” after the collapse of Terra Labs, but it affected smaller exchanges. Platforms like Huobi Korea, Cashierest, and Coinbit have been shut down since the bill was passed last year.
Simon Seojun Kim, CEO of investment firm Hashed Capital, believes well-resourced cryptocurrency exchanges like Upbit will make it easier to meet the requirements. “For existing and new entrants, the cost of complying with these requirements may be significant,” Kim said.
Korbit Research analyst Min Sung Kim agrees, adding that competition will be limited as trading remains “increasingly focused on the top bourse.”
Platforms trying to compete with Upbit's dominance have entered into no-fee campaigns. According to the report, Bithumb briefly challenged Upbit after reaching a peak market share of 39.2% in January. However, the stock fell by more than half after its upgrade ended.
Ultimately, getting into the South Korean cryptocurrency market is still difficult. As we saw recently with Crypto.com, complying with a country's regulatory requirements requires a specific strategy and extensive resources.
Crypto Total Market Cap is at $2.28 trillion. Source: TOTAL on TradingView
Featured image from Unsplash.com, chart from TradingView.com