Upbit, a digital currency platform based in South Korea, controls more than 80% of the country’s trading activities and has emerged as one of the top five exchanges globally in terms of trading volume.

As per a report by Bloomberg, customers of Upbit contributed to almost 20% of the total deposits from major banking partners last year.

The dominance of Upbit has raised concerns, especially as South Korea is moving towards implementing new laws to safeguard investors after the collapse of the TerraUSD stablecoin in 2022.

The upcoming regulations, expected to be in effect by July under the Virtual Asset User Protection Act, will enforce strict guidelines on crypto exchanges, including requirements to increase reserves, improve investor protection, and monitor suspicious transactions.

These worries stem from the apprehension that these regulations could solidify Upbit’s status as the leading platform in the Korean market.

Nam HyeonJoon, a representative from Bithumb, the second-largest trading platform in Korea, emphasized the difficulties brought by the new regulatory environment, mentioning the substantial finances and workforce needed for compliance.

Simon Seojoon Kim, the CEO of Hashed, a South Korea-based venture capital firm, echoed similar views, stating that well-funded exchanges like Upbit might find it simpler to meet the new standards, potentially widening the gap between market leaders and smaller rivals.

The challenges posed by regulations have already impacted international exchanges aiming to enter the Korean market. Crypto.com, headquartered in Singapore, postponed its planned debut in South Korea due to the necessity for further discussions with regulators.

This decision followed reports of regulatory scrutiny and concerns about money laundering practices.

Since the passing of the crypto law in June last year, smaller exchanges such as Huobi Korea, Cashierest, and Coinbit have ceased operations. Analyst Min Seung Kim from Korbit Research anticipates that Upbit will have no trouble complying with the new regulations, pointing out that competition is intensifying among the top platforms.

Despite the regulatory changes, South Korea's enthusiasm for crypto remains strong. Over six million Koreans, representing more than 10% of the population, actively participate in crypto trading, with the Korean won emerging as one of the most traded currencies against crypto-assets globally.

The country continues to be a hotspot for crypto enthusiasts. Ho Chan Chung, head of marketing at Korean analytics firm CryptoQuant, mentioned, “I invested more in stocks before, but now I’m all in crypto.”

Established in 2017 by Dunamu Inc., Upbit has rapidly become a significant player in the crypto market. According to CCData, its global trading volume has surged to nearly 5%, up from 1.4% in January 2021. With backing from Kakao Corp. and Woori Technology Investment, Upbit reached a peak valuation of $15.7 billion during the pandemic.