Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
Crypto exchanges face growing polarization
Lee Sirgoo, CEO of Dunamu, the operator of the Korea's largest cryptocurrency exchange Upbit, poses for The Korea Times following an interview in June 2022. Korea Times photo by Choi Won-suk
By Lee Yeon-woo
Profit booms for top 2 exchanges, while 3 smaller rivals struggle
With interest in crypto investments higher than ever, Korea's top two cryptocurrency exchanges, Upbit and Bithumb, recorded strong profit growth last year, while their smaller rivals — Coinone, Korbit and GOPAX — remain in the red, underscoring the widening gap within the sector, industry officials said Thursday.
In 2024, Dunamu, the operator of Korea's largest exchange Upbit, reported a consolidated operating profit of 1.19 trillion won ($838.7 million) — an 85.1 percent increase from the previous year.
Bithumb, the second-largest, reversed a loss and returned to profitability last year with an operating profit of 130.7 billion won.
Their success was driven by a significant rebound in the virtual asset market, fueled by growing optimism over U.S. President Donald Trump's pro-crypto stance and the approval of spot Bitcoin exchange-traded funds.
"Last year was a milestone, driven by the market's recovery and our proactive efforts," a Bithumb official said. "This year, we plan to take another step forward by enhancing convenience and accessibility through our partnership with KB Kookmin Bank."
Despite the industry's strong rebound, the gains were largely confined to the top two exchanges, failing to extend to others.
Coinone and Korbit recorded operating losses of 6.1 billion won and 16.8 billion won, respectively. Streami, the operator of GOPAX, reported a 3 billion won loss.
Analysts say polarization is unavoidable given how cryptocurrency exchanges operate.
In the stock market, trades are executed through the Korea Exchange regardless of which brokerage a user chooses. However, in the crypto market, order books are not shared across platforms. This makes an exchange’s liquidity crucial for smooth trading, and a large user base becomes a key factor in platform choice.
As of February, Upbit commanded 70 percent of the total market share.
The price of Bitcoin is displayed at a customer lounge at Bithumb in Seoul, February 4. Korea Times file
"Stable liquidity, strong security and solid compliance measures can boost overall market credibility," said KP Jang, head of Xangle Research. "However, the polarization may hinder new players from entering, potentially slowing innovation and leading to stagnation within the industry."
How was current market order established?
In the early years, Bithumb held a dominant position. But the landscape shifted following the 2018 implementation of Korea’s real-name system for crypto trading.
Users must go through bank-verified real-name accounts to buy or sell digital assets on exchanges. As a result, partnerships between cryptocurrency exchanges and banks have become increasingly important.
Upbit gained an early advantage by becoming the first to partner with internet-only Kbank. The timing was strategic, coinciding with the crypto boom during the COVID-19 pandemic, as Kbank was the only one among the five bank partners to offer fully online services.
Bithumb has followed aggressively with an active marketing strategy across both online and offline channels. In 2024, the exchange spent a total of 192.2 billion won on marketing — a twelvefold increase from the previous year.
Can market polarization be solved?
Market watchers say the concentration of capital and market power in the hands of the top two exchanges is expected to intensify.
"The market structure (of Korea) remains entrenched, with smaller exchanges facing financial pressure from rising compliance costs and relying on aggressive campaigns to attract users," Kaiko Research wrote in a report released Thursday.
"Korea's strict regulatory requirements have led many global players to exit, further solidifying the position of the remaining local leaders," it added.
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In March 2023, GOPAX submitted a change-of-ownership filing to designate Binance as its largest shareholder, but the application has remained unapproved for more than two years. Meanwhile, global exchange Crypto.com indefinitely delayed its planned entry into the Korean market, originally scheduled for April 2024, due to regulatory challenges.
Now, with corporate access to crypto trading on the horizon, all eyes are on whether it will disrupt the existing market order.
Financial authorities recently unveiled a three-phase plan to allow corporate crypto accounts. It will start with law enforcement and nonprofits in the second quarter of this year, and later expand to institutional and general corporate users.
"As the first phase is limited to nonprofit organizations' crypto sales (cash conversion of their existing holdings), it is unlikely to significantly impact market rankings in the short term," said Ryan Yoon, a researcher at Tiger Research.
Still, as the market matures, some see potential for change. Globally, new players like OKX and Bybit are gaining traction through diverse marketing strategies. Domestic regulators are also expected to implement long-term policies to curb monopolization and stimulate innovation.
"Strategies such as offering competitive staking (a process that allows investors to earn rewards by locking their coins in wallets) and interest products, integrating with DeFi (decentralized finance) platforms, providing early support for promising tokens or forming partnerships with established fintech firms and securities companies could be viable approaches to capturing a larger market share," Jang said.