Dunamu's classification as conglomerate feared to weaken industry growth

The logo of Upbit is seen in front of the headquarters of its operator, Dunamu. Yonhap

By Lee Min-hyung

Korea's cryptocurrency industry is feared to come under tighter regulatory scrutiny after a recent decision by the antitrust watchdog to designate Dunamu, the operator of the nation's dominant cryptocurrency trading platform Upbit, as a conglomerate, industry officials said, Thursday.

Any domestic companies with assets worth more than 5 trillion won have to be under regulatory control by the Fair Trade Commission (FTC). The watchdog decided to place Dunamu on the list of conglomerates, citing its total assets worth 10.82 trillion won. This has put Dunamu under tougher regulations when making investments.

However, the standard in calculating Dunamu's asset volume remains controversial, as more than half of the figure comes from customer deposits. Dunamu said it would take more responsibility following its inclusion on the list of large business groups, declining to comment further.

Industry sources argued that the FTC's latest decision leaves much to be desired at a time when financial authorities have not confirmed any basic level of legal criteria on whether to classify cryptocurrency exchange operators as financial firms.

For now, crypto exchanges here have not received any legal status as financial companies. But if they are classified as financial industry players, chances are Dunamu can be excluded from the large business group, as conventional financial companies such as banks and insurers do not include customer deposits when calculating their total asset volumes.

“The decision appears to be somewhat rash, as the industry is still in its infancy here and no clear-cut legal standards have been introduced on whether to consider crypto exchanges as financial companies,” an official from the industry said.

“The incoming government has also not fixed its policy direction in the industry, but the company has become the first target of the tighter regulatory scrutiny, which will add to more confusion to industry growth.”

Bithumb, the second-largest exchange operator here, was excluded from the list of large business groups due to its asset volume. According to the company, Bithumb's total assets ― which included customer deposits ― did not surpass 5 trillion won as of the end of 2021.

Another industry official also underscored the importance of setting up clear legal standards on the cryptocurrency industry.

“The government appears to realize the need for Korea to catch up with the global trends on the crypto industry, but the regulation-first stance has not changed in the past few years,” the official said. “Most exchange operators are willing to abide by any regulatory guidelines from authorities, but nothing specific has been fixed, which will keep delaying the industry's growth.”