Regulation

Upbit, Coinone, Bithumb Face New Fees Under South Korea Crypto Law

Published

4 months ago

August 1, 2024

Coin2049 Newsletter

After the introduction of the Virtual Asset User Protection Act in South Korea, crypto exchanges such as Upbit, Bithumb, and Coinone are now required to pay supervisory fees. These fees, estimated to total around 300 million won (approximately $220,000), are based on the operating income of these firms.

Upbit & Other Exchanges To Pay Supervisory Fee

The revised ‘Enforcement Decree of the Act on the Establishment of the Financial Services Commission, etc.’ and the updated ‘Regulations on the Collection of Financial Institution Contributions, etc.’ were announced by the Financial Services Commission on July 1. These changes mandate that virtual asset operators must pay supervisory fees for inspections conducted by the Financial Supervisory Service starting from the coming year.

Under the new crypto law, virtual asset operators are included in the Financial Supervisory Service’s inspection targets. The supervisory fee is calculated based on the operating revenue from the previous fiscal year. For example, using the 2024 contribution rate of 2.686818 per 10,000 won of operating revenue,

Hence, Upbit is expected to pay around 272 million won ($199,592), according to Dunamu’s consolidated financial statements. Meanwhile, Bithumb’s fee is estimated at 21.14 million won ($155,157). Moreover, Coinone and GOPAX are expected to pay approximately 6.03 million won ($4,422) and 830,000 won (608), respectively.

However, Korbit is excluded from these fees as its operating revenue last year was around 1.7 billion won. This income is significantly low to charge a fee, according to the new crypto regulation of South Korea.

Also Read: The Bahamas Introduces New Revised Crypto Law After FTX Saga

Reason For Implementation Of These Fees

The above-mentioned supervisory fees will be implemented starting next year. These fees, similar to a quasi-tax, are charged to financial institutions subject to the Financial Supervisory Service’s inspections, including financial companies. Moreover, Businesses with operating revenue of 3 billion won or more are required to pay this fee.

Historically, the payment of supervisory fees by electronic financial companies such as Kakao Pay and Naver Financial and online investment-linked finance (P2P) companies was spread over three years. However, the imposition of supervisory fees on virtual asset operators has been introduced more rapidly.

This is likely due to the significant growth of the virtual asset market and the increasing focus on preventing unfair trade practices. On the contrary, industry insiders had anticipated a delay in the imposition of these supervisory fees on virtual asset operators, according to local news outlet News Navers.

However, it was reported that the decision was made swiftly by the Financial Supervisory Service. A financial authority official stated, “The related organization has already been formed and costs are being incurred, so the imposition of the supervisory share is necessary.”

While Upbit and Bithumb are better positioned to handle these fees, many other crypto exchanges are operating at a loss. Since the supervisory fee is determined based on operating revenue, Coinone and GOPAX, which are experiencing losses, will still have to pay the fee. Earlier, these South Korean exchanges, including Upbit saw a 30% drop in trading volumes after the new law implementation.

Also Read: Bitcoin Reserve Bill Published By Senator Cynthia Lummis