Unveiling the Listing Effect on Upbit: Backed by South Korea's Richest, the Biggest Winner of the Country's Exchange Compliance Movement

Author: Nianqing, Chain Catcher

Recently, the South Korean exchange Upbit has become one of the most watched cryptocurrency exchanges, often seeing price increases for newly listed coins that surpass those of Binance and Coinbase. Such wealth effects are hard to ignore for a large number of investors.
The following chart shows the price changes of the token after Upbit announced the listing of WEMIX today:

New coins listed on Upbit almost always bring instant gains of 50% or even more than double. So, why does Upbit have such a strong "listing effect"? After research, Chain Catcher reporters believe this is closely related to the exchange's compliance, the resources behind it, and the booming South Korean market.
1. The Biggest Beneficiary of Compliance in South Korean Exchanges
The new coin listing on October 15 last year was Upbit's "famous battle," when the exchange announced the listing of SOL, MATIC, and NU, with NU soaring nearly 10 times and MATIC rising nearly 30% on that day. On October 27, Upbit announced the listing of 1INCH, MASK, and AAVE, with both 1INCH and MASK rising about 100%, and AAVE rising about 50%.
Why did Upbit, which has been established for many years, suddenly ignite the crypto market in October 2021? The reason can be traced back to the ongoing compliance actions for South Korean exchanges that lasted nearly half a year.
For a long time, South Korea has been one of the countries with the highest enthusiasm for the crypto market, and the concept of "kimchi premium" is widely known. This has led to the emergence of a large number of cryptocurrency exchanges in South Korea, with overseas exchanges like Huobi and OKEx also attempting to get a share of the pie.
However, since last year, South Korea has tightened regulations on the crypto market, especially with the implementation of the "Special Financial Transactions Act" on March 25. Exchanges operating in the Korean won market must meet two requirements: obtaining real-name verified deposit and withdrawal accounts in cooperation with Korean banks, and having ISMS (Information Security Management System) certification or an Anti-Money Laundering (AML) system to continue providing services. If a company fails to register its business by September 25, six months later, it faces up to five years in prison or a fine of up to 50 million won.
Under strict regulatory policies, only about 40 virtual asset providers submitted registration applications, with 29 successfully passing the review. Among them, only four fiat exchanges—Upbit, Korbit, Coinone, and Bithumb—became compliant exchanges. Some overseas exchanges were also affected by the regulations. An industry insider working in Korea stated that even though people in the crypto circle are not significantly affected by trading, overseas exchanges currently find it difficult to acquire local Korean users outside the crypto circle. Additionally, over 30 exchanges were forced to close after the regulations, meaning that crypto users, originally dispersed across hundreds of exchanges, would gather in these few exchanges.
Among them, Upbit's virtual asset business report was approved on September 17, making it the first government-approved cryptocurrency exchange in South Korea. After that, to fulfill important responsibilities under the Anti-Money Laundering Law, Upbit initiated public identity verification for its large user base of over 8 million, requiring users to complete it by October 13, or their trading and deposit/withdrawal functions would be suspended.
During this half-year period, Upbit only listed GRT and SNX on April 16, and did not list any new coins afterward. Additionally, Upbit delisted a large number of tokens in response to the upcoming regulatory reforms. This makes it easy to understand why Upbit's new coin listing after half a year immediately triggered a surge in prices, as it was driven by a significant increase in user traffic and the long-suppressed enthusiasm for new coin investments, leading to large-scale purchases of newly listed tokens.
According to publicly available data from the exchange, as of October 2021, the cumulative number of verified members reached 8.9 million, nearly tripling from 3 million in October last year. With South Korea's total population at 52 million, this means Upbit's user penetration rate in the South Korean market has reached 17%, and Upbit only supports users aged 19 and above.
2. Backed by South Korea's Richest, Rich Resources
Another major reason for Upbit's success is the support from the consortium behind it, including Kakao Group and South Korea's new richest person, Kakao Group founder Kim Beom-soo, whose wealth exceeds $13 billion.
In October 2017, Upbit was developed in collaboration with the American cryptocurrency exchange Bittrex by South Korean fintech company Dunamu, which is closely related to Kakao Group.
Kakao is one of the top ten internet giants in South Korea by market capitalization. Kakao Talk, under Kakao, is known as the Korean version of WeChat and is the largest social platform in South Korea, while Kakao Pay is the largest third-party payment platform in South Korea, similar to Alipay in China.
Although in September this year, Dunamu publicly stated multiple times under regulatory scrutiny that it is not a subsidiary or affiliate of Kakao, the equity relationship between the two still suggests that their connection is not simple.
According to public information, although Kakao directly owns a relatively small share of Dunamu, only 8.1%, its VC department, Kakao Ventures, holds 11.7% through the K Cube No. 1 venture capital fund, and the Kakao Youth Entrepreneurship Fund holds 2.7% of the shares. This means that Kakao directly or indirectly holds about 23% of Dunamu's shares. Additionally, Dunamu's CEO Lee Sir-goo is a former co-CEO of Kakao, indicating a deep connection between the two companies.
Therefore, as an important part of Kakao's business landscape, Upbit directly enjoys the vast potential user base from Kakao. Currently, Upbit exchange is compatible with the entire Kakao ecosystem, including KakaoTalk and KakaoPay, allowing users to trade more easily during their first transaction.
As an internet giant involved in various industries such as social media, technology, gaming, entertainment, transportation, and payment, Kakao has long included blockchain and the crypto industry in its new development blueprint. Kakao has established Ground X and received a strategic investment of $90 million in March 2019. Ground X is responsible for developing and operating Kakao's public blockchain platform Klaytn, whose public token KLAY currently has a circulating market value of $3.4 billion.
Founded in 2012, Dunamu initially focused on building security systems for Kakao, having developed Kakao Securities Plus, Kakao Securities MAP service, etc. After launching Upbit in 2017, it began to focus on the blockchain and crypto market, also launching BaaS company Lambda256, Upbit NFT Beta, and stock trading application Stockplus. Its CEO recently stated in an online press conference that Dunamu's goal is to enter the broader global market, with plans to enter the U.S. market through NFT business soon.
3. The South Korean Crypto Market is Growing
Upbit's rise is closely related to the South Korean market's preference for cryptocurrencies. According to data from industry tracking agency Coinhills, South Korea is one of the largest cryptocurrency trading markets in the world, with the Korean won being the third-largest Bitcoin trading currency globally, after the U.S. dollar and the euro.
At the same time, more and more young South Koreans are entering this market. According to Upbit's public data in October 2021, those in their 20s accounted for 31% of its user base, followed by those in their 30s at 29% and those in their 40s at 24%. This is a complete reversal from 2020, when those in their 30s accounted for 39.8%, those in their 40s for 24.1%, and those in their 20s for 20.1%. The proportion of the 20-30 age group rose from 20.1% to 31%, reflecting a significant increase in the enthusiasm of young South Koreans for crypto investments.
In this regard, Koo Jeong-woo, a sociology professor at Sungkyunkwan University in South Korea, believes that the MZ generation in South Korea faces fierce competition in university admissions and harsh employment competition, along with job instability and rapidly rising housing prices. Young people constantly feel a sense of crisis that "opportunities to make money are dwindling," leading to a stronger speculative mentality and gambling nature among them. Investment is seen as the only social ladder for class mobility, and the emerging market of cryptocurrency trading provides them with new stimulation.
Therefore, South Korea has now become an important landscape in the global crypto market. In addition to exchanges like Upbit, venture capital firms like Hashed and the well-known public chain Terra are also influential. The Klaytn public chain and ICON public chain have gained some recognition and are attempting to exert greater influence in the crypto market.