Upbit Investigation: FTC Probes Dunamu Over Alleged Unfair Trading Practices

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Upbit Investigation: FTC Probes Dunamu Over Alleged Unfair Trading Practices

SEOUL, South Korea – February 2, 2025 – South Korea’s Fair Trade Commission (FTC) has launched a significant investigation into Dunamu Inc., the operator of the prominent cryptocurrency exchange Upbit, over allegations of unfair trade practices. This probe, confirmed by local reports on February 2, centers on whether Dunamu restricted trading of its own unlisted shares exclusively to its proprietary platform, potentially stifling competition in the burgeoning market for private company equities. The move signals heightened regulatory scrutiny on major crypto players as they expand their financial ecosystems.

Upbit Investigation: The Core Allegations

According to a report from Chosun Biz, the FTC conducted an on-site investigation at Dunamu’s offices following a formal complaint. The complaint alleges a specific anti-competitive practice: Dunamu reportedly limited the trading of its own unlisted shares to its proprietary ‘Upbit Exchange’ platform. Consequently, this action prevented these shares from being traded on competing unlisted stock trading platforms. The commission is now examining whether this constitutes an unfair refusal to deal with rival platforms, a potential violation of South Korea’s Monopoly Regulation and Fair Trade Act. This practice, if proven, could artificially control market access and disadvantage both investors and competing service providers.

The Context of Unlisted Share Markets

To understand the gravity of the allegations, one must consider the growing importance of secondary markets for unlisted shares. These platforms provide liquidity for early investors and employees in high-growth companies like Dunamu before a public listing. By allegedly confining trading to its own exchange, Dunamu could potentially:

• Control price discovery for its shares.
• Attract users exclusively to its ecosystem.
• Generate additional transaction fee revenue.
• Gain a competitive edge over other trading venues.

This case, therefore, sits at the intersection of cryptocurrency exchange operations and traditional financial market regulation.

Dunamu and Upbit’s Market Position

Dunamu operates Upbit, one of South Korea’s largest and most influential cryptocurrency exchanges. The company has expanded its services far beyond simple crypto trading, venturing into areas like asset management, blockchain technology, and notably, the trading of unlisted securities. This diversification is a common strategy for crypto giants seeking to build comprehensive financial hubs. However, with expansion comes increased regulatory attention. The FTC’s investigation reflects a global trend where authorities are closely monitoring whether the dominant market power of large tech and fintech firms translates into anti-competitive behavior in adjacent markets.

Regulatory Landscape for Crypto Exchanges in South Korea

South Korea maintains one of the world’s most active and tightly regulated cryptocurrency markets. The Financial Services Commission (FSC) and the Financial Intelligence Unit (FIU) enforce strict anti-money laundering and user protection rules. Meanwhile, the FTC focuses on ensuring fair market competition. This investigation demonstrates how these regulatory mandates can converge on a single entity. Previously, the FTC has penalized other tech firms for leveraging dominance in one sector to gain advantage in another. A precedent often cited is the case against major online platform operators for favoring their own payment services. The Dunamu probe follows a similar logical framework, applying competition law to the novel context of crypto-native financial ecosystems.

Expert Analysis and Potential Impacts

Legal experts specializing in fintech regulation suggest the outcome of this investigation could set a crucial precedent. “This case tests how traditional competition law applies to the vertically integrated models of crypto exchanges,” a Seoul-based regulatory attorney commented, noting the importance of the platform’s dual role as both a market operator and a participant. If the FTC finds wrongdoing, potential consequences for Dunamu could include:

• Corrective orders to open its share trading to competing platforms.
• Administrative fines calculated as a percentage of relevant revenue.
• Reputational damage affecting user trust and investor relations.

Furthermore, a formal sanction could trigger more stringent oversight from other financial regulators, potentially affecting Upbit’s broader licensing and operations.

Broader Implications for the Crypto Industry

The investigation arrives at a pivotal moment for the global cryptocurrency industry, which is increasingly seeking legitimacy through compliance. For exchanges, the path to growth often involves building “walled garden” ecosystems where users can access multiple services. However, regulators worldwide are questioning whether these practices harm competition and consumer choice. The FTC’s scrutiny of Dunamu sends a clear signal to other crypto firms: expansion into new financial services must not come at the expense of fair market principles. This could encourage more proactive compliance reviews and potentially lead to more open architecture models in crypto finance, benefiting competition and innovation in the long term.

Conclusion

The FTC’s investigation into Dunamu over alleged unfair trade practices represents a significant development in the maturation of South Korea’s cryptocurrency sector. It underscores the application of established competition law to the dynamic and evolving business models of crypto exchanges. The core of the Upbit investigation—whether restricting unlisted share trading to a proprietary platform harms competition—will be closely watched by regulators, industry participants, and investors globally. The outcome will likely influence how crypto exchanges structure their expanded service offerings and navigate the complex interface between innovation and regulation. As the probe continues, it reinforces the necessity for transparency and fair play as foundational elements for the sustainable growth of the digital asset industry.

FAQs

Q1: What is the FTC investigating Dunamu for?
The South Korean Fair Trade Commission (FTC) is investigating Dunamu, operator of the Upbit crypto exchange, for allegedly restricting the trading of its own unlisted shares exclusively to its Upbit platform, preventing trade on other exchanges. This is being examined as a potential unfair refusal to deal with competitors.

Q2: Why is trading unlisted shares on only one platform a problem?
Confining trade to a single, proprietary platform can be anti-competitive. It may limit liquidity, distort price discovery, disadvantage rival platforms, and force investors to use a specific service, potentially violating fair trade laws designed to ensure open markets.

Q3: What could happen if Dunamu is found guilty?
Potential consequences include corrective orders to open trading to other platforms, significant administrative fines based on relevant revenue, and reputational damage. It could also lead to increased scrutiny from other financial regulators in South Korea.

Q4: How does this affect Upbit users and crypto traders?
For now, the investigation does not directly affect standard cryptocurrency trading on Upbit. However, a negative outcome could impact the company’s operations and reputation. In the broader sense, it reinforces the importance of regulatory compliance, which can lead to a more stable and trustworthy trading environment.

Q5: Is this part of a larger trend in crypto regulation?
Yes. This case exemplifies a global trend where regulators are applying traditional financial market rules—like antitrust and competition law—to the expanding ecosystems of large cryptocurrency exchanges. It highlights the growing integration of crypto into the mainstream financial regulatory framework.

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