Upbit, a Seoul-based exchange located in the exclusive Gangnam district, has captured the majority of Korea’s cryptocurrency market. According to a Bloomberg report, the platform now dominates 80% of trading volume in Korea, a level of market share unmatched by any other major cryptocurrency exchange.
Its popularity among local investors has pushed it into the top five exchanges in the world, competing directly with industry giant Coinbase.
In fact, Upbit’s customers held nearly one-fifth of all deposits held by its main banking partner, which drew criticism from South Korean lawmakers.
Upbit may continue to grow thanks to new regulations
Meanwhile, new regulatory measures introduced to protect investors may unintentionally strengthen Upbit’s position in the market.
Regulations require cryptocurrency exchanges to increase their reserves, obtain investor protection insurance and better monitor suspicious transactions, all of which require significant capital and manpower.
Meeting these requirements will be more feasible for established exchanges such as Upbit, potentially widening the gap between them and their competitors.
In light of the regulatory environment, Singapore-based Crypto.com recently postponed its planned launch in South Korea, citing the need for further communication with regulators.
Despite setbacks such as the collapse of stablecoin TerraUSD in 2022, South Korean traders remain among the most enthusiastic participants in the cryptocurrency market.
Official figures show that in the first half of last year, more than 6 million Koreans, or more than 10% of the population, traded cryptocurrencies on registered exchanges.
TheKorean won even surpassed the U.S. dollar as the most traded currency against crypto assets worldwide.
The allure of cryptocurrency investment has also permeated the political sphere in Seoul, with candidates in the recent general election pledging to delay a tax on digital assets or ease restrictions on investing in U.S. bitcoin ETFs.
The exchange is growing into a giant in its sector
Upbit, operated by fintech company Dunamu Inc. was founded in 2017 and is steadily gaining ground. The exchange now accounts for nearly 5% of global cryptocurrency trading volume, a significant increase from 1.4% in January 2021.
Dunamu, founded by former executives of mobile payments company Danal , received early support from South Korean internet giant Kakao Corp. and Woori Technology Investment.
During the pandemic-driven bull market, Dunamu reached a peak valuation of $15.7 billion, making it one of Korea’s most valuable start-ups.
To strengthen its position, Upbit has entered into a strategic partnership with Kakao, operator of the dominant local mobile messaging app, enabling users to seamlessly synchronize their KakaoTalk and Upbit accounts, simplifying the deployment process.
Upbit’s success has led to the closure of smaller exchanges that were unable to compete with the rapidly growing exchange.
With the implementation of the Law on the Protection of Users of Virtual Assets in July, South Korean regulators will impose strict requirements on cryptocurrency exchanges, including potential life sentences for criminal acts.
Exchanges will be required to segregate user deposits and take responsibility in the event of hacks or system failures. As a result, smaller exchanges such as Huobi Korea, Cashierest and Coinbit have already been shut down.
Last October, Bithumb briefly challenged Upbit’s dominance by offering a zero-fee promotion, which helped it gain significant market share. However, after the promotion ended, Bithumb’s market share fell by more than half. Other exchanges, such as Korbit and Gopax, backed by Binance, hold less than 1% market share.
