Experts Say "Fair Trade Regulation of Virtual Asset Industry Theoretically Possible"
"Should Proceed with Caution as There Are No Global Precedents"
The Korea Fair Trade Commission (KFTC) announced that it will “discuss with the Financial Services Commission (FSC) and report the results to the National Assembly” regarding the market monopoly controversy surrounding Upbit, the country’s number one virtual asset exchange. This enables the KFTC and FSC to jointly discuss policy directions and prepare government-level response measures concerning the Upbit monopoly issue.
On February 19, the KFTC responded to a query from Kang Jun-hyun, a member of the Democratic Party of Korea, stating, “Considering various circumstances in the virtual asset exchange market, we will seek policy directions to promote market competition and address concerns about monopolies.”
The KFTC added, “We are fully aware of the various concerns regarding the monopoly issue in the domestic virtual asset exchange market.” On February 18, Kang had submitted a written inquiry requesting the KFTC to present its stance on the monopoly controversy in the virtual asset market, which has been pointed out since last year’s (2024) national audit, and to discuss with the FSC while considering various perspectives such as the need to secure the global competitiveness of the domestic virtual asset market, and report to the National Assembly.
"Fair Trade Regulation Including Corporate Divestiture Possible"
Upbit has largely dominated over 80% of domestic virtual asset trading volume, sparking ongoing monopoly controversies. At times, it has approached as high as 90%. Even when expanding the competition scope globally, it ranks second worldwide among exchanges using fiat currency. Accordingly, Upbit is classified as a market-dominant business operator under the Monopoly Regulation and Fair Trade Act (Fair Trade Act).
Legal experts agree that the harms caused by the monopoly of virtual asset exchanges should be rectified. A lawyer from a major law firm specializing in fair trade said, “If clear abuse of market-dominant position by a virtual asset exchange is detected, authorities can impose sanctions under the Fair Trade Act,” adding, “Just as the U.S. government ordered the divestiture of Microsoft (MS) due to monopoly concerns, theoretically, if the monopoly system of virtual asset exchanges worsens, a decision to split the exchange is not impossible.” Another lawyer who mainly handles financial cases said, “There is no legal provision excluding monopoly regulation just because it is a licensed industry like the virtual asset industry,” and “There have been precedents where monopoly issues in licensed industries were pointed out.” They noted that for fair trade regulation to be applied, “it must be proven that the market-dominant position was actually abused.”
"No Precedent for Virtual Asset Exchange Regulation"
However, there are voices urging caution in applying fair trade regulations to the virtual asset industry. Considering the industry’s nature, which practically requires government permission to enter, it may not be appropriate to hastily apply the logic of the Fair Trade Act. A lawyer from a major law firm said, “Upbit was not the industry leader from the start but won out in competition among five exchanges,” expressing doubt about whether this can be considered a monopoly. He added, “Given the licensed industry’s characteristics, if Upbit is sanctioned, only other companies would gain indirect benefits,” and “In licensed industries, it seems more appropriate to prepare and enforce laws such as the Act on the Protection of Financial Consumers to sanction companies for acts unfavorable to consumers.” Another virtual asset specialist lawyer said, “There are hardly any precedents worldwide for monopoly regulation of virtual asset exchanges,” and “Since the virtual asset trading market’s scale and participating exchanges depend on how ‘market definition’ is set, including the status of overseas exchanges, it is necessary for authorities to first establish consumer protection measures and guide exchanges to comply rather than rushing into regulation.”
Review of Second-Phase Comprehensive Virtual Asset Regulation Legislation
On February 18, at the plenary session of the Political Affairs Committee, FSC Chairman Kim Byung-hwan responded to a question from Kim Byung-gi, a Democratic Party member, regarding the monopoly controversy by saying, “We will discuss with the KFTC.” He also said, “We will consider together how to include the business conduct of exchanges in the second-phase legislation on virtual assets.”
Currently, financial supervisory authorities mainly regulate unfair trading under the “Act on the Protection of Virtual Asset Users, etc.,” which came into effect on July 19, 2024. This law is referred to as the first-phase legislation. Subsequently, the National Assembly and government are reviewing second-phase legislation for a comprehensive basic law regulating virtual asset operators, reflecting market and expert opinions. Chairman Kim also responded during the October 2024 Political Affairs Committee audit that he “is aware of the issue” regarding Upbit’s market monopoly. At that time, he made the remark in response to Democratic Party member Lee Kang-il’s point that “Upbit’s market share in trading volume, deposits, sales, and fees exceeds 70%, constituting a monopoly under the Fair Trade Act.”
Hong Yoon-ji, Reporter, Legal Times
※This article is based on content supplied by Law Times.
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