Crypto Market Crash Likely As South Korea FSC Investigates Upbit

On Thursday, South Korea’s Financial Services Commission (FSC) announced that they would be investigating the rising monopoly of crypto exchange Upbit in the country’s crypto landscape and its partnership with K-bank. The scrutiny on the world’s second-largest crypto exchange by spot trading can trigger a crypto market crash with Bitcoin (BTC) and Ethereum (ETH) already dropping by 2% today.

Upbit Partnership With K-Bank Under Scanner

During the National Assembly State audit on Thursday, October 10, South Korea’s Democratic Party lawmaker Lee Kang-il shared concerns over the growing monopoly in the country’s crypto landscape. He specifically pointed out at the dominance of the country’s largest crypto exchange Upbit.

Responding to this, Financial Services Commission (FSC) Chairman Kim Byung-hwan stated: “I am aware of the problem with Upbit’s monopoly system.”

Furthermore, Representative Lee stated that Upbit has continued to increase its market dominance following its partnership with K-Bank. He also highlighted concerns over the large portion of K Bank’s deposits held by Upbit, especially as the bank prepares for its upcoming initial public offering (IPO). The lawmaker added:

“Out of K Bank’s 22 trillion won in deposits, Upbit deposits account for 4 trillion won, or 20%. If Upbit transactions are cut off, a bank run on K Bank will occur.”

While questioning the financial arrangement between K-bank and Upbit, Lee criticized K Bank’s decision to offer a 2.1% interest rate on deposits from Upbit customers, despite the bank’s operating profit margin being below 1%. He also stated that this close relationship violates the principle of separating finance from industry.

Responding to this, FSC Chairman Kim said: “I believe the K-Bank listing review has been sufficiently reviewed. We will review the matter comprehensively through the Virtual Asset Committee.”

On the other hand, Upbit has continued to initiate necessary measures on regulatory fronts. In July, it took measures to prevent insider crypto trading while complying with the Virtual Asset User Protection Act (VAUPA).

Crypto Market Crash Ahead?

The crypto market has been facing strong selling pressure as Bitcoin (BTC) reverses its trajectory from $65,000 once again this week. In the last 24 hours, the BTC price is down another 2.5% slipping under $61,000 as of press time.

Back in 2018, the executives at crypto exchange Upbit faced a strong investigation over allegations of fraud. The development was enough to send the crypto market spiraling down. Now, with the exchange having even more dominance in the global crypto space than in 2018, investors shall not undermine what’s to come.

Currently, investors are eagerly waiting for the US CPI data release for September. The market is already pricing with a probability of less than 50 bps rate cuts in November. The altcoin space is also facing selling pressure with top alts dropping 2% each.