Could South Korean Crypto Exchanges Be Safe from Bankruptcy Risk?
With some of the biggest names in the crypto exchange game apparently teetering on the cusp of bankruptcy, attention in South Korea is turning to domestic trading platforms. And some are suggesting that the nation’s sector may be safe from insolvency – at least for the time being.
Per a report from the newspaper Kookmin Ilbo, there are some key differences between the likes of FTX and domestic heavy hitters like the “big four” platforms: Upbit, Bithumb, Korbit, and Coinone.
The newspaper claimed its research of the four companies’ financial performance over the years shows an almost 1:1 correlation with the price of Bitcoin (BTC).
For instance, all four posted healthy growth figures in 2017, when BTC prices rose. But in 2018, they generally made heavy losses – with Korbit posting eye-watering losses of almost $350 million. When BTC prices rose again in 2020, transaction volumes (and profits) uniformly shot up.
The newspaper wrote:
“Bithumb turned from a company with a net profit of more than $380 million (in 2017) to a company with losses of more than $152 million [in 2018]. That happened within the space of one year.”
The report’s authors added that the business models used by domestic exchanges were “overly reliant on transaction fees.”
“All four exchanges,” the authors explained, effectively have “no source of income other than commission fees.” Other business interests represented a mere 1% of all four exchanges’ combined pre-tax profits.
Unlike many of their overseas counterparts, Kookmin Ilbo noted, the fact that domestic exchanges “did not issue their own coins” and did not use these in their business models has “resulted in reduced risk” for the platforms.
Some have asserted that the FTT token was the ultimate undoing of
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