Is the high annualized stablecoin interest unreasonable? South Korea puts pressure on five major exchanges Upbit, Bithumb, etc.

This site (120bTC.coM): South Korea's "Virtual Asset User Protection Act" has officially come into effect on July 19. It aims to protect the rights and interests of virtual asset users and establish a healthy market order. This law The implementation marks an important step taken by the Korean government in regulating the virtual asset market.

Competition in deposit utilization rates heats up

According to Korean media News1, since the implementation of the "Virtual Asset User Protection Act", competition in "deposit utilization rates" among major exchanges in South Korea has become increasingly fierce. On the 20th, Upbit raised the previously announced interest rate from 1.3% to 2.1%, Bithumb raised it from 2.0% to 2.2%, and Korbit followed suit by raising the interest rate to 2.5%.

Subsequently, the leading Bithumb further raised the interest rate from 2.2% to 4.0% on the 23rd. This includes the 2.0% interest rate generated by the operation of the real-name account cooperative bank NH Nonghyup Bank, plus an additional 2.0% interest rate paid by Bithumb.

The deposit utilization rate refers to the deposit utilization rate paid by virtual asset exchanges or financial institutions to users. When users deposit funds into exchanges or financial institutions, these institutions may use the funds to conduct operating or investment activities, thereby generating income. This rate includes the interest that the exchange or financial platform receives from the bank, as well as some of the additional fees they pay to users.

The financial authorities withdrew the 4% interest rate after deeming Bithumb’s interest rate unreasonable

The Korean financial authorities considered the 4.0% interest rate offered by Bithumb unreasonable and therefore blocked it.

According to the "Virtual Asset Industry Supervision Regulations", virtual asset operators should consider operating income, incurred costs and other factors to conduct "reasonable calculations" and pay user deposit interest accordingly. As Bithumb’s additional payment was questioned as to whether it was reasonable, the exchange ultimately withdrew its decision to increase the interest rate by 4.0%.

The Financial Supervisory Service convened an emergency meeting

In order to calm down fee competition, the Financial Supervisory Service (FSS) of South Korea also urgently convened South Korea’s five major virtual asset exchanges (Upbit, Bithumb, Coinone, Korbit, Gopax) today (24th). Discuss matters related to deposit utilization rates. A relevant person from the Financial Supervisory Service said: It seems that various exchanges have not been able to reach an agreement on the calculation standards for deposit utilization rates in regulatory regulations, so they called exchanges to reconfirm the calculation method.

It is understood that each exchange reports to the authorities one by one what banking products are used to manage deposits and how deposit service rates are calculated.

The relevant person in charge of the virtual asset exchange said: Although interest rate calculation is the inherent authority of the exchange, it has also actively negotiated with banks and submitted relevant information to the Financial Supervisory Service.

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