Traders ‘disappointed’ with crypto exchanges’ messy customer benefits disclosures

Controversy is brewing in the South Korean crypto community after exchanges delayed submitting data on benefits policies and offered big-spending traders exclusive rewards.

The regulatory Financial Supervisory Service told the country’s five permit-holding crypto exchanges to submit the data by April 15, South Korean newspaper Seoul Shinmun reported. However, Bithumb and Upbit, the nation’s two biggest trading platforms, sent their reports on April 17.

The FSS has asked the firms to provide reasons for the delays.

“It all sounds very disorderly,” Kim, a Seoul-based crypto trader and a customer of both Korbit and Upbit, told DL News.

Kim asked DL News to withhold his given name to protect his anonymity.

The FSS issued its request in the wake of a Bithumb’s “fat finger” mishap, whereby an employee who intended to send $400 to users accidentally selected Bitcoin instead of Korean won as a unit — and sent out $40 billion worth of Bitcoin.

High spenders rewarded

The data shows that the five exchanges offered millions of dollars’ worth of benefits to a select group of high-spending customers.

Unnamed crypto industry officials told Seoul Shinmun the data shows evidence of “inconsistent standards.”

The FSS had asked the exchanges to send the data in accordance with protocols established by the Digital Asset Exchange Association. The association is the South Korean crypto exchange sector’s self-regulatory body.

But the companies do not appear to have coordinated their responses to the regulator.

Coinone, Korbit, and GOPAX disclosed data on benefits from the past five fiscal years. But Bithumb’s disclosure only reflected data from February and March. Upbit, meanwhile, only disclosed data on the benefits it offered to three VIP customers.

DAXA did not immediately respond to a DL News request for comment.

“It’s all disappointing, and it really isn’t a good look for exchanges that supposedly work together as part of a self-regulating body,” Kim told DL News.

Coinone’s report shows it offered commission fee discounts worth a combined $79 million over the past five years. Korbit and GOPAX handed out discounts worth $6.7 million and $2.6 million, respectively, in the same period.

Upbit, meanwhile, offered the aforementioned three VIP traders an eye-watering $4.5 million worth of discounts.

Gap in costs

The data shows exchanges use VIP tiers that offer their biggest-spending customers lower commission fees.

“If exchanges offer the majority of their benefits to users with high trading volumes, the fee burden for ordinary investors will likely remain quite high,” an unnamed crypto industry professional told Seoul Shinmun. “Ultimately, this creates a structure whereby traders on the same market experience a gap in transaction costs.”

“If there has been confusion about how [DAXA’s disclosure protocols] should work, it is important for [its members] to refine these standards,” Hwang Seok-jin, a professor at  Dongguk University’s Graduate School of International Information Security, told Seoul Shinmun.

The development comes weeks after Bithumb postponed plans to float on the New York Stock Exchange. Bithumb originally planned to go public before the end of June this year, but now says the initial public offering will not go ahead until 2027 at the earliest.

Upbit is also facing a regulatory delay ahead of its proposed merger with the e-pay arm of the tech giant Naver.

Tim Alper is a News Correspondent at DL News. Got a tip? Email him at tdalper@dlnews.com.