Competition intensifies, regulations tighten⋯ A new landscape in the coin exchange market

Source: BlockMedia Original Title: Competition intensifies, regulations tighten… ‘Political controversy and share restrictions’ test the coin exchanges Original Link: https://www.blockmedia.co.kr/archives/1030946 The competitive landscape of the domestic won-based digital asset exchange market is becoming increasingly complex. While the duopoly of Upbit and Bithumb remains dominant, the presence of smaller exchanges is gradually growing. However, industry insiders express concerns that regulatory uncertainties and conservative policy stances are limiting the growth potential of the entire won-based exchange sector.

Intensified Competition for Market Share Between Upbit and Bithumb

According to Data & Research, the largest domestic exchange, Upbit, ranked first in investor interest as of December last year. It was mentioned a total of 40,014 times across online channels such as news, community forums, and blogs. This positive trend is attributed to the strengthening of AI-based services.

However, Upbit’s market share has shown some fluctuations. Following a hacking incident, trading volume decreased, bringing Upbit’s market share down to approximately 61%. The operating company’s performance also slowed. Revenue in Q1 last year was 516.2 billion won with an operating profit of 396.3 billion won, but by Q3, these figures had decreased to 385.9 billion won and 235.3 billion won, respectively.

Second-place Bithumb rapidly expanded its market share through aggressive marketing strategies. Its share increased from 23.56% in January last year to 29.68% in December, an increase of over 6 percentage points. Bithumb spent 192.2 billion won on marketing in 2024, and in the first three quarters of last year, it invested 199.3 billion won.

However, concerns have been raised about Bithumb’s financial structure. While its cash holdings exceed 3 trillion won, 2.62 trillion won of this is in restricted ordinary deposits. The company relies on fee income for 98.4% of its revenue, highlighting limitations in business diversification. Especially ahead of an IPO, the company is focusing on cost reduction and management efficiency. Recently, Bithumb announced to employees that cash-based welfare points were reduced from 8.5 million won to 4 million won, and support for children’s education funds was also limited. Last year, Bithumb introduced a new performance evaluation system called ‘In & Out’ and conducted a voluntary resignation program for about 60 underperforming employees in July.

Small and Medium Exchanges Expand Presence Through Differentiation and Partnerships

As the dominance of major exchanges shows signs of weakening, smaller exchanges are gradually increasing their presence. Korbit and Gopax have adopted strategies to strengthen external partnerships. Korbit is expanding its connections with traditional financial institutions amid its pursuit of acquisition by Mirae Asset. Mirae Asset holds a stake in Upbit, and Dunamu, the operator of Upbit, along with Naver Financial, are strategic partners, suggesting potential synergies among affiliates.

Gopax, after a global exchange acquired a 67% stake in February 2023, resolved uncertainties last October when it received approval from the Financial Services Commission’s Financial Intelligence Unit (FIU) to change executives. Industry experts expect that if domestic futures and options trading are permitted in the future, the capabilities of global exchanges could positively impact Gopax.

Coinone has strengthened its differentiation strategy by launching new services such as Coin Gathering, Coin Lending, and AI Grid. As a result, even during last year’s downturn, its market share expanded to 5.6%.

Won-Based Exchanges Face Growth Limitations Due to Conservative Regulations

Amid escalating competition among exchanges, financial authorities are moving to tighten regulations further. Recently, the authorities are reportedly discussing measures to limit the stake of major shareholders in digital asset exchanges to 15%. Currently, major shareholders include: Dunamu’s CEO Song Chi-hyung with 25.5%, Bithumb Holdings with 73.6%, Chairman Cha Nam-hoon of Coinone with 54%, NXC with 60.5% stake in Korbit, and a global exchange with 67% stake in Gopax. If these regulations are implemented, adjustments to major shareholder stakes are likely to be necessary.

There have also been recent enforcement actions. In November last year, the Financial Intelligence Unit imposed a fine of 35.2 billion won on Upbit for violations related to customer verification and suspicious transaction reporting. In December, Korbit received a warning and a fine of 2.73 billion won for violations of anti-money laundering obligations.

Industry insiders express concerns that won-based exchanges, limited to the domestic market, are facing growth constraints under regulatory burdens. Particularly, the rapid increase in trading through overseas exchanges has raised serious concerns about capital outflows. Approximately 160 trillion won in funds moved from domestic exchanges to overseas markets in 2025 alone. Coupled with the overall downturn in the digital asset market, trading volume in December last year plummeted. During that period, Upbit’s trading volume dropped from 271.62 trillion won to 48.99 trillion won, a decrease of about 82%. Bithumb’s trading volume fell from 91.92 trillion won to 23.6 trillion won, a 74% decline. Other exchanges also saw significant decreases: Gopax by about 89%, Korbit by 61%, and Coinone by 21%.

Industry experts advocate for opening the digital asset market to foreign investors. Allowing foreign individuals and companies to use domestic exchanges and introducing well-verified derivative products could facilitate rapid foreign capital inflows. Such capital inflows are expected not only to boost short-term investments but also to expand across the domestic blockchain industry, fostering a competitive ecosystem that combines finance and industry.