South Korean Lawmaker: Regulators Playing Squid Game With Domestic Crypto Exchanges

Crypto Exchange South Korea

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Tim Alper

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Tim Alper

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Tim Alper is a British journalist and features writer who has worked at Cryptonews.com since 2018. He has written for media outlets such as the BBC, the Guardian, and Chosun Ilbo. He has also worked...

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October 10, 2024 19:30 EDT

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A South Korean lawmaker has accused the nation’s top regulator of “playing Squid Game” with domestic crypto exchanges – allowing Upbit to thrive at the expense of its rivals.

Per Newsworks and Chosun Ilbo, the Democratic Party of Korea lawmaker Lee Kang-il hit out at the Financial Services Commission (FSC).

Lee made the comments when FSC Chairman Kim Byung-hwan faced questioning from the National Assembly’s State Affairs Committee on October 10.

Squid Game: Regulators Are Killing off Competition, Says MP

Lee accused the FSC of allowing Upbit to build a “monopoly.” He said the exchange had cornered the lion’s market share while its rivals faded.

“The Financial Services Commission is playing Squid Game here. It is saving only one company. And it is killing all the rest.”

Democratic Party of Korea lawmaker Lee Kang-il

Lee was drawing an analogy with the international drama hit Squid Game, a dystopic thriller series where contestants play a game where defeat results in death. The lawmaker said:

“Upbit’s crypto deposit sales commission accounts for over 70% of the industry’s total. That effectively makes it the unrivaled leader in the industry. Under the terms of the Monopoly Regulation and Fair Trade Act, that makes Upbit a monopoly.”

Kim conceded that this was a concern. And he said he would “look into the monopoly structure” of the crypto market, and Upbit’s position.

“I am aware of the problem.”

FSC Chairman Kim Byung-hwan

South Korean Crypto Market Could Be “Marginalized”

Lee went on to claim that South Korea was in danger of losing its status as “a leader in the cryptoasset market.” He said the nation risked becoming “marginalized.”

“Upbit is the largest exchange in South Korea and the second largest in the world. But domestic exchanges, both those active in the fiat market and crypto-to-crypto markets, are all dying. This is due to the fact that the crypto market here is excessively concentrated on one company.”

Democratic Party of Korea lawmaker Lee Kang-il

Lee also hit out at Upbit’s partner bank, K Bank, and its own plans to launch an initial public offering (IPO) in the second half of this year.

The lawmaker said that Upbit customers account for some 20% of K Bank’s deposits, adding:

“If Upbit transactions are cut off, it will result in a bank run at K Bank. […] The [relationship] between Upbit and K Bank goes against the principle of the separation of finance and industry. That principle was created to prevent industrial capital from exercising its influence over banks.”

Kim claimed that the FSC would perform a “thorough review” of the K Bank IPO bid in the wake of Lee’s comments.

The lawmaker went on to request that regulators and government officials help domestic crypto exchanges develop “overseas expansion channels.” He said:

“The main factor in the deepening of the monopoly situation in the cryptoasset market is the fact that [firms’] activities are limited to the domestic market. That is weakening global competitiveness. Because there is a lack of linkage with global exchanges, liquidity connectivity with the dollar and other fiat currencies is very low.”

Overseas Expansion a Must, Lawmaker Insists

Lee claimed that tight regulation of the domestic market was “blocking funds” from “coming in from overseas.”

He concluded that “trillions” of Korean won “per year,” moves from “domestic platforms” to overseas exchanges.”

“But there are almost no cases of funds moving in the opposite direction. This is a serious problem.”

Lee

This is not the first time South Korean lawmakers have accused Upbit of turning into a “monopoly.”

As recently as July this year, more Democratic Party MPs also voiced their concerns about Upbit’s “potential monopoly status.”