tl;dr
South Korean crypto exchanges have paid $87 million in interest on fiat deposits over the past year, following the Virtual Asset User Protection Act enacted in July last year. The law requires reasonable interest payments at five major exchanges: Upbit, Bithumb, Coinone, Korbit, and GOPAX. Interest ...
South Korean crypto exchanges have paid a total of $87 million in interest on fiat deposits over the past 12 months, according to data submitted by the Financial Supervisory Service. This information, revealed following a freedom of information request by National Assembly member Heo Young, highlights a significant shift in the interest fee landscape since the implementation of the Virtual Asset User Protection Act in July last year.
The Act mandates reasonable interest payments on fiat deposits held by customers at five major South Korean crypto exchanges: Upbit, Bithumb, Coinone, Korbit, and GOPAX. Before this law, interest rates were minimal, typically at 0.1% per annum. However, the introduction of the Act triggered fierce competition among exchanges, with some offering exceptionally high quarterly interest rates to attract new users. Bithumb notably announced a 4% rate but retracted it within six hours.
Interest rates have gradually decreased since the initial surge. By the end of June, Upbit's rate stood at 2.1%, Bithumb at 2.2%, Coinone at 2.0%, Korbit at 2.1%, and GOPAX at 1.3%—all still higher than the roughly 1% standard offered by most commercial banks. Recently, these platforms have begun adjusting rates downward in response to the Bank of Korea’s base interest rate cuts. Korbit reduced its interest rate to 1.9%, and Coinone plans to lower its rate to 1.77% next month.
A spokesperson from the Financial Supervisory Service emphasized the need to establish a fair method for calculating interest that maintains competitive order among exchanges. Meanwhile, lawmaker Heo expressed concern that despite providing a safety net, a disproportionate amount of capital remains concentrated in a few exchanges, with Upbit holding over 60% of market share and effectively dominating the market. Heo affirmed ongoing efforts to refine the regulatory framework to protect users and promote a healthy, competitive crypto exchange environment in South Korea.