In an impressive display of growth within the cryptocurrency landscape, South Korean exchanges have disbursed a staggering $87 million in interest to their users for fiat deposits over the past year. This revelation, reported by Yonhap News Agency, stems from data submitted by the Financial Supervisory Service (FSS) following a transparency request by Democratic Party lawmaker Heo Young, a prominent member of the National Assembly’s Political Affairs Committee.
This remarkable figure reflects the significant impact of the Virtual Asset User Protection Act, enacted in July of the previous year, which mandated that exchanges such as Upbit, Bithumb, Coinone, Korbit, and GOPAX ensure reasonable interest payments on customer fiat deposits. Before this legislation came into play, investors faced an uninspiring interest rate of merely 0.1% per annum, but the act ignited fierce competition among exchanges, prompting a race to offer attractive yields that could draw in new customers.
As platforms began implementing quarterly interest payouts, it wasn’t long before Bithumb set the bar high with a bold announcement of a 4% interest rate — only to retract it just six hours later! This initial burst of activity led to a landscape where competing exchanges started to iterate on their rates. By the end of June this year, the interest rates were as follows:
- Upbit: 2.1%
- Bithumb: 2.2%
- Coinone: 2.0%
- Korbit: 2.1%
- GOPAX: 1.3%
Even these rates, particularly from GOPAX, outstripped the average offerings from traditional banks, which hover around 1% for savings accounts.
However, as the financial tide begins to shift, particularly with the Bank of Korea’s recent decision to cut base interest rates, some exchanges have started to reevaluate their offerings. Korbit has already lowered its rate to 1.9%, while Coinone is set to drop its rate to 1.77% starting next month. In the face of fluctuating rates, the FSS is working on establishing a standard for calculating interest payments that maintains competitive integrity across platforms.
While Heo Young acknowledges the protective measures embedded in the act, he highlights the concern that capital is overly concentrated within a few dominant exchanges, with Upbit commanding more than 60% of the market share. He called for continuous improvements to the system to safeguard users while fostering a competitive environment.
This unfolding narrative in South Korea’s crypto sector poses questions about the future of interest payments and market dynamics. Will more exchanges join the rate cut trend? How might users adapt to these fluctuations? As the regulatory landscape evolves and competition becomes more heated, only time will tell.
For those looking to stay informed on the latest developments in cryptocurrency and finance, it’s always a good idea to keep an eye on news from reputable sources such as CoinDesk and The Block.