There is a movement to regulate the monopoly of Upbit, the number one domestic virtual asset exchange. The industry has criticized that the authorities are focused on beating up companies with anti-market moves. It is pointed out that regulating exchanges chosen by coin investors for convenience and other services is an act that shakes the market order.
According to the virtual asset industry on the 23rd, the Financial Services Commission (FSC) and the Fair Trade Commission (FTC) are discussing measures to limit Upbit’s monopoly in the market and to strengthen the competitiveness of small and medium-sized virtual asset exchanges. On the 19th of last month, Financial Services Commission Chairman Kim Byung-hwan stated at a plenary session of the National Assembly’s Political Affairs Committee, “The authority of the supervisory authorities to limit the monopoly of the market itself is limited, so I will discuss it with the FTC.” Fair Trade Commission Chairman Han Ki-jung also said, “We will actively review (Upbit’s monopoly) by analyzing the competitive situation and the market and, if necessary, through research services.”
Upbit's monopoly is a regular topic of state audits every year. It has been raised consistently since Upbit's market share surpassed half. In fact, according to the virtual asset data platform CoinGecko, the market shares of the KRW market exchanges (based on trading volume) on the previous day were Upbit 53%, Bithumb 41%, Coinone 4.2%, Korbit 0.5%, and GOPAX 0.3%. Upbit and Bithumb, which are in 1st and 2nd place, alone have a market share of over 90%. When the virtual asset market hit a 'bull market' due to the 'Trump rally', Upbit's market share even approached 90%.
However, the industry consensus is that it is not convincing to sanction Upbit solely for having the largest market share. This is because according to the Monopoly Act, the purpose of a monopoly is to regulate unfair business activities by businesses that have ‘abused’ their market dominance.
Last year, the Joe Biden administration in the United States filed an antitrust lawsuit against the giant big tech company Apple. The reason was that Apple abused its monopoly in the smartphone market and limited the choices of customers and app developers by only allowing Apple services to be linked in the App Store. The US Department of Justice found that Apple violated antitrust laws by blocking apps that threatened the company and reducing the appeal of apps from competitors.
However, the political circles and the government have not raised the issue of abuse regarding Upbit’s monopoly. Last October, Rep. Kim Hyun-jung of the Democratic Party of Korea, a member of the Political Affairs Committee, raised the issue of Upbit’s monopoly during the Fair Trade Commission’s inspection. She believes that Upbit has a monopoly on the market and earns a lot of commissions, so an investigation and measures for monopoly are necessary. In the process, there was no mention of the harm caused by Upbit’s monopoly or the cause of the monopoly.
In particular, the anti-monopoly law restrains companies from exercising influence beyond government control. However, under current law, domestic virtual asset exchanges are conducting business under the control of financial authorities. According to the Specific Financial Information Act (Special Financial Information Act), virtual asset service providers (VASPs) must file a business renewal report every three years in accordance with the virtual asset reporting system. The Financial Intelligence Unit (FIU) under the Financial Services Commission reviews the renewal report requirements and decides whether to accept or reject them within three months.
The virtual asset exchange is divided into 'won market' and 'coin market'. Won market must obtain a real-name account from a commercial bank and obtain permission from the authorities according to the Special Financial Transactions Act. The long-cherished wish of the coin market exchange is to convert to a won exchange. This is because most coin market exchanges are experiencing management difficulties. Currently, 16 out of 24 domestic coin market exchanges (66.7%) are scheduled to close or suspend operations due to management difficulties.
In other words, the existence of virtual asset exchanges depends on the influence of financial authorities. This means that virtual asset exchanges that are already operating under the control of authorities are far from violating the anti-monopoly law. The reason why the industry's argument that sanctioning Upbit solely on the grounds of monopolizing market share without any clear illegality is anti-market regulation is persuasive is because of this. A virtual asset industry insider emphasized, "Upbit's high market share is the result of user choice," and "This is the natural free market principle at work."
