South Korea’s biggest crypto exchanges are set to be regulated by the country’s conglomerate regulator — a sign that they’ve gone from relative obscurity to mega-corporations in just a few short years. But the regulatory decision would also bolster scrutiny of what is already a heavily controlled industry.

Kookmin Ilbo reported that the Fair Trade Commission (FTC) seeks to classify Bithumb and dunamu – the operator of the market leader Up bit exchange – as “big conglomerates”, due to the fact that together they represent 90% of the national crypto market.

The FTC is expected to officially announce its new ratings on May 1.

Classification as a “large business group” or “conglomerate” requires companies to comply with stricter regulations and would require further scrutiny. The South Korean business landscape is dominated by family business groups, such as Samsung, LG, JC, hyundaiand Sask.. Known as chaebol in South Korea, these corporate groups have been accused of wielding disproportionate power – and several governments have tried to tackle this problem by dismantling companies and imposing strict regulations on companies.

So the FTC did the kind of work done by a monopoly commission in other countries.

“Large conglomerate” companies must comply with additional financial disclosure requirements and must publish regular reports on the status of their stock holdings.

Company directors and their family members are also bound by strict rules on expropriation and the company must follow them. Some blocks are also placed on investments and cross-shareholdings – whereby listed companies hold significant amounts of shares in other listed companies.

However, a wrinkle presented itself. In order to prove that a company should be classified as a “large business group”, the FTC must prove that its total assets are worth some $4 billion. However, the report pointed out that the FTC had counted client assets as well as exchange funds in its calculations.

Unnamed crypto industry officials were quoted as warning that additional regulatory pressure would likely stifle growth.

And the results of the recent presidential election could pose an additional hurdle. President-elect Yoon Suk-yeol spoke positively about the domestic crypto industry and is determined to promote the growth of the sector. Yoon will be sworn in on May 10 — just nine days after the FTC announced its decision.

But the prospect of getting in trouble with a new president can be off-putting to the FTC, especially since Yoon (who met with officials from Bithumb and Upbit before the election) wants to “increase the size of the crypto market by applying market-friendly policies”. “and taking a softer regulatory twist” on the crypto market,” Kookmin Ilbo noted.

Either way, the FTC seems determined to act. One official was quoted as saying:

“It would be difficult for us to create exceptions that only apply to crypto exchanges.”

Bithumb was founded in 2014 and Upbit in 2017. The former recently unveiled plans to expand into the metaverse with a subsidiary named Bithumb Metawhile Upbit’s blockchain subsidiary Lambda256 recently raised some $60 million in a Series B funding round that would have valued the company at over $300 million.
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