The South Korean crypto market is facing twin regulatory challenges. First, the country's top exchanges—Upbit and Bithumb—have drawn criticism for delayed and inconsistent disclosures of customer benefits, while an unregistered exchange exploits an iOS App Store loophole to evade a government ban.
According to a report by Seoul Shinmun, the Financial Supervisory Service (FSS) ordered all five licensed exchanges to submit data on their customer benefits policies by April 15. However, Bithumb and Upbit, the nation's two largest platforms, only submitted their reports on April 17. The FSS has demanded explanations for the delays.
The data reveals that exchanges offered millions of dollars in perks to high-spending VIP clients, creating what critics call a 'gap in transaction costs' between ordinary and elite traders. Coinone disclosed commission fee discounts worth a combined $79 million over the past five years. Korbit and GOPAX reported discounts of $6.7 million and $2.6 million, respectively. Upbit, meanwhile, provided just three VIP traders with discounts worth $4.5 million.
'If exchanges offer the majority of their benefits to users with high trading volumes, the fee burden for ordinary investors will likely remain quite high,' an unnamed crypto industry professional told Seoul Shinmun. Professor Hwang Seok-jin of Dongguk University noted that if confusion exists over disclosure protocols, 'it is important for [DAXA's members] to refine these standards.'
Seoul-based trader Kim, a customer of Korbit and Upbit, expressed disappointment: 'It all sounds very disorderly. It really isn’t a good look for exchanges that supposedly work together as part of a self-regulating body.'
Separately, an unregistered overseas exchange called KCEX continues to operate in South Korea despite an official ban. According to a report by BitcoinWorld, the exchange leverages a loophole in Apple's iOS App Store, which does not individually vet apps for compliance with foreign financial regulations. KCEX was flagged by financial authorities in August 2024 for failing to register with the Financial Services Commission (FSC).
The app remains downloadable for South Korean users, undermining enforcement efforts. A 2024 FSC report found over 30 unregistered overseas exchanges targeting South Korean users. Legal experts point to jurisdictional challenges as the primary barrier. Dr. Kim Min-ji, a professor at Seoul National University, commented: 'The current regulatory framework assumes a centralized, cooperative environment. The crypto market is neither.'
The FSC has discussed requiring app stores to block unregistered exchanges, but such mandates would face legal challenges from Apple and Google.
