South Korean Crypto Exchanges Face Scrutiny Over Disorganized Customer Benefit Disclosures

Exchanges Miss Deadline for Customer Benefit Data Submission

South Korea’s crypto exchange sector is under regulatory scrutiny after major platforms delayed submitting data on customer benefits policies. The Financial Supervisory Service (FSS) had mandated that the country’s five licensed exchanges—Bithumb, Upbit, Coinone, Korbit, and GOPAX—submit the required reports by April 15.

However, Bithumb and Upbit, the two largest exchanges by trading volume, submitted their data two days late, on April 17. The FSS has since requested explanations for the delays.

Traders Criticize Disorganized Disclosures

“It all sounds very disorderly.”

Kim, who requested anonymity, added:

“It’s all disappointing, and it really isn’t a good look for exchanges that supposedly work together as part of a self-regulating body.”

Exclusive Rewards for High-Spending Traders

The submitted data reveals that exchanges provided millions in benefits to a select group of high-spending customers, raising concerns about inconsistent standards.

The Digital Asset Exchange Association (DAXA), South Korea’s self-regulatory body for crypto exchanges, had established protocols for the disclosures. However, the exchanges did not appear to coordinate their responses:

• Coinone reported commission fee discounts worth $79 million over the past five fiscal years.
• Korbit disclosed discounts totaling $6.7 million in the same period.
• GOPAX reported $2.6 million in discounts.
• Upbit provided data on benefits for just three VIP customers, totaling $4.5 million in discounts.
• Bithumb only disclosed data from February and March, covering a fraction of the required period.

Concerns Over Market Inequality

Industry experts warn that the focus on high-spending traders could create an uneven playing field:

“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. Ultimately, this creates a structure whereby traders on the same market experience a gap in transaction costs.”

Calls for Standard Refinement

Hwang Seok-jin, a professor at Dongguk University’s Graduate School of International Information Security, emphasized the need for clarity:

“If there has been confusion about how [DAXA’s disclosure protocols] should work, it is important for [its members] to refine these standards.”

Regulatory and Market Pressures Mount

The controversy follows Bithumb’s recent setbacks, including a postponed plan to list on the New York Stock Exchange. The exchange originally aimed for an IPO before June 2024 but now states it will not proceed until 2027 at the earliest.

Upbit is also facing regulatory delays, adding to the sector’s challenges.