South Korean crypto exchanges paid their customers $87 million worth of interest on their fiat deposits in the past 12 months.
Per the South Korean news agency Yonhap (via Daum), data on interest payments was submitted by the Financial Supervisory Service on July 27 after a freedom of information request from the Democratic Party lawmaker Heo Young.
Heo is a member of the National Assembly’s Political Affairs Committee.
South Korean Crypto Exchange Interest Fee Competition
The data shows that the nation’s five fiat-trading platforms have paid their customers interest worth a combined 120.26 billion won since the launch of the Virtual Asset User Protection Act in July last year.
The law stipulates that the exchanges (Upbit, Bithumb, Coinone, Korbit, and GOPAX) must make reasonable interest payments on fiat deposits held on exchange platforms.
Prior to the law’s launch, platforms typically made nominal interest payments of just 0.1% per annum.
However, the act’s introduction sparked a wave of competition. Platforms began scrambling to draw in new customers with eye-wateringly high interest rates, paid quarterly.
This culminated in Bithumb announcing a 4% interest rate, only to perform a u-turn just 6 hours later.
Since this flurry of interest rate-related activity, platforms have slowly begun reducing their rates.
At the end of June this year, Upbit was offering 2.1%. Bithumb was offering 2.2%, with Coinone offeing 2.0%, Korbit 2.1%, and GOPAX setting rates of just 1.3%.
However, even GOPAX’s rate was still considerably higher than most commercial banks’ standard 1% account interest rates.
Interest Rates on Their Way Down?
Platforms have since begun responding to the Bank of Korea’s decision to cut base interest rates. Korbit lowered its usage fee rate to 1.9% this month. Coinone has also announced its decision to cut its rate to 1.77% starting next month.
A Financial Supervisory Service spokesperson said the regulator wants to “create a standard for calculating interest payments that does not “undermine competitive order.”
Heo, meanwhile, claimed that while the act provides a “safety net” for users, too much capital is still “concentrated in certain exchanges.”
These comments come after accusations that Upbit has been allowed to create a de facto monopoly in the exchange scene, commanding over 60% of the market share. The lawmaker said:
“We will continue to improve the system to protect users and establish a sound and competitive environment.”
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