Estimated Interest Income of 3.8 Billion KRW Last Year
Sales and Transaction Volume Increase Amid Bitcoin Rally
Obligation to Pay Deposit Usage Fees Upon Law Enforcement in July
Last year’s renewed Bitcoin rally caused the customer deposits of Dunamu, the operator of the cryptocurrency exchange Upbit, to swell to 4 trillion won. It is estimated that the interest income paid by K-Bank, Upbit’s contracted bank, to the company also reached 4 billion won. Starting from July, a law containing provisions for interest payments on deposits of coin investors will be enforced, so the interest income Upbit has earned so far is expected to be returned to coin investors.
According to the business report submitted by Dunamu to the Financial Supervisory Service on the 18th, as of the end of December 2023, the deposit liabilities corresponding to customer deposits amounted to 3.828 trillion won, an increase of 950 billion won from 2.8684 trillion won the previous year. This was due to the increase in Upbit’s service sales and transaction volume last year. K-Bank, which has a contract with Upbit to issue real-name accounts, is also expected to have increased interest income paid on customer deposits. The industry-estimated deposit interest rate is 0.1%, and the interest income for last year is expected to be about 3.8 billion won.
Upbit has so far used the interest income earned from customer deposits for Environmental, Social, and Governance (ESG) activities. Since Upbit is not a bank or similar institution, it cannot pay the interest income received from K-Bank to customers. The current Act on the Regulation of Similar Receipt of Funds prohibits non-financial companies without authorization from receiving investment funds from many people and paying interest. When controversy arose over deposit business in the past, Upbit disclosed in 2022 that it used all 5.8 billion won of interest income for ESG activities aimed at vulnerable youth and others.
The situation will change when the "Virtual Asset User Protection Act" is enforced in July. Cryptocurrency exchanges will have to pay users fees for the use of deposits. Accordingly, cryptocurrency exchanges can operate deposits to generate profits, and coin investors will also receive a kind of interest income. Since the Bitcoin rally is expected to continue until the end of this year, interest income is also expected to continue its net increase trend. An Upbit official stated, "The plan for paying deposit usage fees is currently under discussion."
K-Bank also holds the position that there is no problem with using Upbit customer deposits even after the law is enforced in July. In K-Bank’s case, deposits have been stored in a corporate deposit account under the exchange’s name while paying interest. Typically, corporate deposit accounts can be used at the bank’s discretion as credit loan funds, but K-Bank drew a line by saying it is currently not operating funds for loan purposes.
A K-Bank official explained, "Since the second half of 2022, we have been using funds only for government bonds, repurchase agreements (RP), and other financial resources," adding, "Because we operate so that cash can be liquidated if customers want to withdraw, there is no problem even if the law is enforced in July."
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