Part 1. KRW Market Concentration and the Shadow of Fair Competition
KBR Research
This report analyzes the concentration of Korea's crypto trading market in the KRW market, the Upbit–Bithumb duopoly, competition and fairness issues arising from market concentration, and the background including the one-exchange–one-bank arrangement.
Trading Concentrated in the KRW Market: A Domestic Market Locked into a Duopoly
Korea's virtual asset trading market has been structured around the KRW market. Investors prefer exchanges that support convenient KRW deposits and withdrawals, which in turn has amplified the concentration of trading volume in two venues—Upbit and Bithumb. As of early 2025, these two exchanges reportedly account for about 98% of domestic trading volume, effectively forming a duopoly.[1] This far exceeds the benchmark commonly used to assess market dominance under Korea's competition framework (e.g., the combined share of the top three firms exceeding 75%), illustrating how extremely concentrated the virtual asset market has become. Smaller exchanges split the remaining ~2%, leaving them with negligible market influence.
Source: Financial News, "Upbit loses top spot... market share below 70%," Jan 5, 2026 (data: CoinGecko)
This duopoly hardened after the 2021 implementation of the virtual asset service provider (VASP) reporting regime. Many small and mid-sized exchanges failed to meet information security requirements and the bank-issued real-name account requirement; they either shut down or were forced to operate as crypto-to-crypto only platforms. As a result, only a handful of exchanges survived with direct KRW trading. Today, KRW deposit/withdrawal support is largely limited to the so-called "top four" exchanges—Upbit, Bithumb, Coinone, and Korbit—yet Upbit and Bithumb still hold overwhelming advantages. New investors and capital naturally flow to the leading venues, reinforcing a rich-get-richer dynamic.
Problems Caused by Market Concentration: Restricted Competition and Fairness Concerns
As the market concentrates into a small number of large exchanges, multiple fairness concerns emerge. Typical consequences of weak competition include:
Limited Consumer Choice
In practice, investors have little choice but to use certain exchanges to access desired services. With only a tiny number of KRW-market venues, users are compelled to accept the trading environment offered by those exchanges. For example, if a user wants a coin or feature not provided on Upbit, there are few domestic alternatives; relying on overseas exchanges can be difficult due to language barriers and regulatory friction. Moreover, under the current one-exchange–one-bank partnership structure, switching exchanges can require opening a new bank account—an additional burden that raises switching costs and weakens competition.[2] These high switching costs lock users into specific exchanges and hinder competition.
Figure 2: One-exchange–one-bank [Source: Maeil Business TV]
Higher Consumer Costs, Including Fee Increases
A lack of competitive pressure can affect both fees and service quality. Around the July 2024 enforcement of the Virtual Asset User Protection Act, Upbit and Bithumb reportedly raised trading fees sharply—from around 0.1% to around 2%. Bithumb even announced a plan to raise fees to around 4% at one point. This move triggered major controversy as users viewed it as behavior bordering on coordinated fee hikes by dominant players, effectively shifting the burden to users. After regulators urged exchanges to set fees at a reasonable level, Bithumb withdrew its plan within just four hours. This episode illustrates how consumer interests can be easily harmed when competitive constraints are weak. If there had been sufficient competition, such a sharp fee increase would have been difficult to attempt.
Figure 3: Virtual asset exchange fee comparison
Slower Service Innovation
In concentrated markets, incumbents can maintain stable profits without pushing meaningful innovation. Critics argue that major domestic exchanges—despite surging fee revenue over recent years—have been slow to improve transparency around listing standards or to enhance investor-facing protections and conveniences. Key areas such as publishing listing review procedures, improving market abuse detection, and providing 24/7 customer support are central to investor protection; however, progress has often been limited. When competitive pressure to improve service quality is weak, the costs ultimately fall on users.
Erosion of Market Order and Trust
When trading volume is dominated by a single venue (or a small set of venues), that exchange's prices can effectively become the domestic reference price—raising questions about transparent price discovery. If unfair practices such as wash trading or price manipulation occur inside a dominant exchange, external detection and correction become structurally difficult. Since the price formation mechanism depends heavily on internal exchange systems, market participants may find it harder to trust that prices are fair. This can reduce confidence in the broader virtual asset market and hinder healthy development.
Why the Market Became So Concentrated: KRW-Market Structure and Barriers to Entry
Behind this severe concentration lie institutional and structural drivers. A key factor is the real-name bank account partnership practice discussed above. Since 2018, the so-called "one exchange–one bank" rule has operated as an informal constraint: a bank partners with only one exchange to provide KRW deposit/withdrawal accounts. While not explicitly codified in statute or subordinate regulation, regulators' anti-money laundering guidance has been treated as effectively binding in practice. This created a substantial entry barrier—KRW-market operation requires securing a partnership with a commercial bank. However, conservative banks have tended to avoid partnerships with new exchanges, and analyses suggest that emerging platforms have had little success obtaining bank relationships. As a result, KRW-market access remained limited, further entrenching the position of established large exchanges such as Upbit.
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