[ANALYSIS] Upbit under attack from ruling party lawmaker – Korea Times

A pedestrian passes by the headquarters of Upbit operator Dunamu in Seoul in this 2018 file photo. Yonhap

Crypto exchange denies illegal forex trading allegation



By Park Jae-hyuk



Upbit, the nation’s leading cryptocurrency exchange operated by Dunamu, has become the primary target of criticism from a four-term ruling party lawmaker lately, facing another unfavorable factor in addition to the government’s efforts to tighten regulations on the virtual assets industry.



Last week, Rep. Noh Woong-rae of the Democratic Party of Korea (DPK), who is also considered one of the top insiders of the party, issued a press release raising suspicions the Upbit operator may have been involved in illegal foreign exchange transactions using its shell corporations in Singapore and Indonesia.



He claimed that the police will investigate Upbit in the near future.



This came after JTBC, a local broadcaster, reported earlier this month that the police were paying attention to the exchange’s possible Foreign Exchange Transaction Act violations through the method of trading foreign currencies internationally without a licensed broker. The cable channel also raised questions about the materiality of Upbit exchanges in Singapore and Indonesia, showing the absence of employees there.

Ruling Democratic Party of Korea lawmaker Noh Woong-rae / Korea Times photo by Seo Jae-hoon

“If a major cryptocurrency exchange faces an allegation of being involved in illegal acts, this can be seen as a very serious case,” Noh said. “The government should reveal the truth through international cooperative investigations and should take measures to prevent the recurrence of such transactions.”



Dunamu, which had attributed the absence of workers at Upbit offices in Singapore and Indonesia to a work-from-home policy, also issued a press release right after Noh’s claim.



“Our overseas partners are Upbit Singapore, Upbit Indonesia and Upbit Thailand, and all of them are licensed exchange operators, not shell corporations,” it said. “We do not have any stake in the foreign partners.”



The Upbit operator flatly denied all allegations of illegal foreign exchange transactions, emphasizing that the exchange is only assigned to intermediate trades between a random seller and a random buyer, without enabling transactions between specific people.



The company added it has heard nothing about any police investigation so far. The lawmaker’s office did not issue an additional statement regarding this issue, saying the company should be guaranteed its right of reply.



However, Noh’s aide did not conceal his discomfort over the exchange’s response.



“We just said what we have checked,” the lawmaker’s aide said Monday. “When the police reveal whether or not they have launched an investigation, you will be able to realize which side has told the truth.”



This is not the first time this year for the lawmaker to level criticism at Upbit.



In June, the exchange was criticized for delisting about 30 types of cryptocurrencies in apparent attempts to avoid a scoring deduction in an assessment of cryptocurrency exchanges before the implementation of tightened regulations.



Noh said at that time that Upbit had enraged investors, because it did not give the reason for its decision. In addition, he mentioned a controversy over a claim from the issuer of a delisted coin that the exchange had illegally received “listing fees” from issuers.



“Cryptocurrency exchanges had previously listed unqualified coins indiscriminately, so their abrupt delisting without proper explanation to investors can be seen as very irresponsible,” the lawmaker said.

Financial Services Commission Chairman Eun Sung-soo answers questions about regulations on virtual assets at the National Assembly in Seoul, July 13. Korea Times photo by Oh Dae-geun

Possible impact on partnership with K bank



From the viewpoint of Dunamu at this moment, any criminal charges could deal a critical blow to its sustainability.



Starting from Sept. 24, cryptocurrency exchanges in Korea will not be able to do business unless they join hands with commercial banks that can provide them with real-name accounts.



However, domestic banks have remained reluctant to form partnerships with small or problematic exchanges, after Financial Services Commission Chairman Eun Sung-soo clarified earlier this month that affiliated banks should be responsible for accidents or illegal acts involving cryptocurrency exchanges.



This has raised concerns that not even the nation’s four largest exchanges ― Upbit, Bithumb, Coinone and Korbit ― are guaranteed survival.



K bank, which was supposed to decide whether or not to renew its partnership with Upbit by the end of last month, postponed the decision to Sept. 24. As a result, it is still unclear whether or not the internet-only bank will continue to collaborate with the exchange.