Overview of Cryptocurrency Interest Payments in South Korea
Over the past year, South Korean cryptocurrency exchanges have disbursed approximately $87 million in interest to their fiat depositors, as revealed by a report from Yonhap news agency. This data, originating from a freedom of information request by Heo Young, a lawmaker affiliated with the Democratic Party and a member of the National Assembly’s Political Affairs Committee, illustrates the financial dynamics evolving within the crypto market in South Korea.
Impact of the Virtual Asset User Protection Act
The report, submitted by the Financial Supervisory Service (FSS) on July 27, highlights that the five major trading platforms—Upbit, Bithumb, Coinone, Korbit, and GOPAX—collectively paid a staggering 120.26 billion won in interest since the enforcement of the Virtual Asset User Protection Act in July of the previous year. This legislation mandates these exchanges to offer reasonable interest rates on the fiat deposits held within their platforms, a shift from the previously meager interest payments that averaged only 0.1% annually.
Competitive Landscape Among Exchanges
The introduction of the act has prompted a competitive rush among these platforms to attract users by significantly increasing their interest offerings, often paid out quarterly. Notably, Bithumb once proposed a bold 4% interest rate, though they quickly backtracked within a mere six hours. Currently, interest rates have adjusted to more conservative levels, with:
- Upbit and Korbit at 2.1%
- Bithumb at 2.2%
- Coinone at 2.0%
- GOPAX at a lower 1.3%
Remarkably, even GOPAX’s rate supersedes the typical 1% offered by commercial banks.
Recent Economic Changes and Future Outlook
Recent changes in the economic landscape, particularly the Bank of Korea’s decision to lower base interest rates, have led some exchanges to reevaluate their offerings. Korbit has decreased its rate to 1.9%, and Coinone plans to reduce its rate further to 1.77% next month.
Concerns Over Market Concentration
A spokesperson from the Financial Supervisory Service noted that they aim to establish a standardized method for calculating interest payments without disrupting competitive conditions in the market. Lawmaker Heo expressed concern about the potential for excessive concentration of capital within a few exchanges, asserting that while the Virtual Asset User Protection Act serves as a protective measure for users, it has allowed platforms like Upbit to dominate, controlling over 60% of the market share. He emphasized the need for a more equitable distribution of users across the available exchanges.
