CoinDesk Korea held a New Year’s interview with leading companies in the blockchain and cryptocurrency industry in 2021. Dunamu (Upbit), Bithumb, Coinone, Kobit, Streamy (GoPax), Plutos DS (Hanbitco), Ground X, Koda (KODA), KDAC.
Upbit (launched in 2017) operated by Doonamu is the two pillars of the Korean cryptocurrency exchange along with Bithumb. Bithumb, which started in 2014, is highly popular, but Upbit, which has been invested by Kakao, has emerged as the largest exchange in Korea by offering convenient services such as supporting KakaoTalk authentication.
The background of Upbit’s stable growth is Lee Seok-woo, CEO of Doonamu, who has been in charge of management for more than three years since December 2017. He was selected as the’Person of the Year’ in the annual CoinDesk Korea survey for the second consecutive year.
Coindesk Korea met Lee at the Dunamu office in Yeoksam-dong, Seoul on December 29th. He said he was focusing on preparing business reports from financial authorities in line with the enforcement of the Specific Financial Information Act in March 2021. He emphasized that the’Virtual Commercial Industry Rights Act’, which encompasses the industry, should come out quickly following the special regulation law.
Regarding XRP (Ripple), which several exchanges have stopped trading due to a lawsuit against securities law in the United States, he said, “We are closely watching, but we can judge it only after the lawsuit is over,” he said. “There is no plan to delist immediately.”
―Unlike 2017 and 2018, it is analyzed that the market is led by institutional investors in the United States. Can you see this trend in the upbit transaction statistics?
“Almost all Upbit customers are individuals. Will Korean institutions be able to put money into bitcoin? I’m not sure.
However, it is true that the atmosphere is much more mature than three years ago. At that time, it was a frenzy of’don’t ask, investment’. Now not as much as then. Once in a riot, investors have matured. It seems to be the time to enter or the stage of weighing.
Now Bitcoin has been recognized for its asset value. Looking at the solid price increase, it seems that there is a stable demand.”
―Do you think the future of blockchain and cryptocurrency is promising?
“I think both will have a lot of use in the future. The government’s dichotomy of thinking that’blockchain technology is encouraged but not digital assets’ will not solve the problem. So-called coins and digital assets as an incentive in service. When used, it can be very efficient, and eventually it can change our lives to the roots.
Thirty years have passed since the Internet came out, and we use our smartphones to access the web on a daily basis. There is hope that in the near future blockchain will also do so. Not all services are going to go well, but I think we’ll go in that direction gradually.”
-There were also many scammers in the industry.
“In the early days of the coin craze, there were so many scammers that there were many bad things. It is important to build trust step by step.”
―What are the key projects of Dounamu in 2021?
“First of all, Upbit, the most important service, is regulated by the Special Regulations Act from March. The urgent thing to do is to meet the reporting requirements, and among them, money laundering prevention is the most important. It is possible to create a bank-level anti-money laundering system one morning. It may not be, but until March, we are driving to build the best system among Korean exchanges.
And there is a’Securities Plus unlisted’ service. I have several ideas, such as applying blockchain, so I am waiting for the results after applying for the regulatory sandbox. Also, (cryptocurrency) is a concern that must be resolved. We decided to go ahead and review it again from the beginning.”
―Are you preparing for the first domestic reported and accepted exchange?
“I will apply on the date of the report as much as possible. There is no special reason to postpone it. However, rather than making the report first, the right place will be chosen by the customer.”
―Virtual asset business operators are being incorporated into the institutional sector. How do you think the domestic exchange industry will be reorganized?
“If the reporting system is introduced, it will decrease a lot. It is fortunate that there will be no strange places that come into existence as a result of the standard coming up late. After all, it is good for customers.
The backside of being regulated by the government is that it is recognized as an industry. In the original order, the Commercial Rights Act must come out, and the appropriate regulations must come out. However, as assets crossed the border, a regulatory law was first created. The order has changed, but it would be nice if the Virtual Asset Business Rights Act was established as soon as the taxation and regulation began.”
―Kookmin Bank and Shinhan Bank launched a virtual asset consignment business. Do you think financial institutions and exchanges will become rivals in the future?
“We can cooperate, we can compete. There are many possibilities because it is still too early. We also tried to do our own (consignment business), but it was not easy, so we are reviewing it from the beginning. There are places where we cooperate with banks, but there are enough places to cooperate with banks. There seems to be room.”
―If you are entrusted, you will be able to do various businesses. What are some of them?
“If you have a large amount of digital assets entrusted, you can do a variety of businesses such as lending and staking. You can also enter the node of the proof-of-stake (PoS) model. Like a depository and settlement agency, you can simply hold securities and settle. Rather, since it is a digital asset, positive alpha such as asset management is possible.
On the other hand, there is also a’downside’. Have you ever been hacked with Upbit? Thinking about that, we can’t sleep well at night, but we can’t handle it without expertise. With trust, you can open an attractive new business, but the risks are huge. That should be taken into account.”
―Dunamu is also providing a consignment service for an institution called’Upbit Safe’. What is the current status of the domestic consignment market?
“Institutions come in a lot to store a large amount of coins in order to become a meaningful consignment. No institutions have entered yet, and profitability is low for individuals alone. There is still possibility, and the market needs to be more mature. First, prepare but earnestly. It seems it takes time to go back to.”
―At a press conference at the end of 2018, Kiwoom Securities was used as an example, and in the future, the exchange could be difficult with only transaction fees, so he said that he would open a business outside the exchange. Two years have passed, but there seems to be no achievement other than Upbeat. How is it going?
“Once the’Securities Plus unlisted’ service is going well, it is a sign of optimism. Lambda 256 is spun off to launch a practical service-type blockchain (BaaS) service. It is not convertible for money, but many platforms are through Lambda. I think that the birth is an achievement.
Doonamu Partners said that it will invest 100 billion won for three years, but so far it has invested about 66 billion won. Not all blockchain companies, but 40 companies that have invested are steadily growing. There are companies that have disappeared in the middle because the blockchain market is so bad, but they have their own achievements.
The upbeat body is so large that there is no killer service that surpasses it, but we are trying several possibilities.”
―Why recently ended its subsidiary DXM’s Trinito business (reservation loan service)?
“The expected market was not unfolding, and the assumptions we had premised were not satisfied, so we decided to review it from the beginning. We are thinking about whether we are doing it alone or with a partner.”
-Are you trying to cooperate with financial institutions such as banks and securities companies?
“The bank is interested in contacting us, but there is no decision. I don’t know if other financial institutions such as securities companies are interested.”
-The US Treasury Department intends to apply travel rules (money transfer rules) to transfers between exchanges and personal wallets. What kind of wave is expected, and what should domestic exchanges prepare?
“Financial authorities will certainly want it. The International Anti-Money Laundering Organization (FATF) guidelines also have travel rules. But now, it is the stage of setting the policy direction. No matter how much the Financial Crimes Enforcement Agency (Finsen, FinCEN) wants, it is difficult to identify the wallet. And all exchanges have to be’mapped’ so that they can be tracked like a bank account. Applying the travel rules will take time.”
―Do you think that cryptocurrency also needs travel rules?
“The direction is correct. In order to get into the system, you have to follow several rules, but anti-money laundering is the minimum rule. In the beginning (cryptocurrency prices) started to trade without government intervention, but in reality they can be used for illegal funds. If that happens, the industry has grown to a scale that hurts the whole. If money laundering is not prevented in the movement of financial assets, financial authorities in each country cannot recognize this industry.”
―Does Kookmin Bank participate in creating a cryptocurrency wallet’white list’?
“I haven’t heard anything about it.”
―In what direction do you think the Most Assets Business Rights Act should be made?
“Wouldn’t it be necessary to define what digital assets are first, then define various business types such as exchanges, trusts, wallets, etc., and have minimum requirements and obligations?
It would be nice if the standards were clear. The worst thing about business is the ambiguity. It must be predictable, good or bad, but it is unclear whether or not it should be left at the discretion of the authorities. If you ask, they don’t even answer.”
―Recently, PayPal has attracted attention, but in the US, it has been a few years since you can buy and sell bitcoins through Robin Hood and Cash App. In Korea, if the government changes the tone for virtual assets, Kakao Pay, Toss, etc. may open up investments in Bitcoin. Furthermore, if it is recognized as a financial product, it would be possible to invest in bitcoin in a brokerage app (MTS). Then, will the competitiveness of the exchange decrease?
“Rather, thank you for that. Even if customers don’t come into Upbit, you can partner with other platforms, and if your customer pool grows, you can use Upbit more. It’s still a distant story. I hope we get there.”
―The public service using blockchain has not yet come out. Most of the 8000 cryptocurrencies in CoinMarketCap lack usability. Do you think there could be a popular blockchain service in the future? Or do you think that only bitcoin will survive as an investment asset?
“The Internet also needed 30 years, but will the usability we expect come out in a short period of time? It seems to be too early to judge.
Still, the possibility is great. (Exchange) selects coin projects and presents them to the public in the sense that new investment opportunities can be opened. Not all will succeed, but from the perspective of the project, there is an opportunity to raise funds and to participate in the ecosystem for investors. (Exchange) should be listed carefully, and (investors) should invest carefully.”
―Japan is a unique form in which the association decides to list coins.
“That seems to be one way too. From the perspective of investor protection, it is a policy decision by the Japanese government to trade only blue chip coins with low risk.
On the other hand, it can limit investors’ choices. Some argue that exchanges in the blockchain industry can quickly identify technology trends, and associations such as quasi-government officials are inefficient.
Unfortunately, our government has delayed making policy decisions. Now, it is realistically difficult to decide to’trade a few.’
-The US Securities and Exchange Commission (SEC) filed a lawsuit against XRP (Ripple) for violating the securities laws. Foreign exchanges that stop trading XRP are coming out. How are you going to upbit?
“We are paying close attention, but I think we will be able to judge when the lawsuit is over. We have no plans to delist immediately, as we have to consider whether the US law also applies to our country.”
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