Upbit, the Korean cryptocurrency exchange which is number one in Korea in terms of trading volume, is being dogged by controversy over national wealth outflow.
According to the financial industry on March 1, the controversy was aroused as it was belatedly known that Bill Shihara, CEO of Bittrex, a US cryptocurrency exchange, recently said, “Upbit in South Korea is Bittrex's retail shop."
Upbit’s coin (cryptocurrency) transactions are linked to Bittrex. Upbit has an active coin-to-coin market where users buy cryptocurrencies with other currencies such as Bitcoin, Ethereum, and Tether and offerings in the market are shared by Upbit and Bittrex.
It is said that this fact makes a lot of commissions paid to Upbit for transactions flow into Bittrex. It is assumed that Bittrex will take a significant portion of transaction fees in the coin-to-coin market of Upbit.
Upbit receives only 0.05% transaction fees from both sides in the Korean won market, but it receives 0.25% transaction fees in the form of cryptocurrencies from the coin-to-coin market. This rate is the same as the one (0.25%) on the Bittrex website. "Taking into account the fact that Bittrex was a global exchange in October of last year when Upbit started its operations in partnership with Bittrex, the terms of profit sharing may have been much more favorable to Bittrex," said an industry observer. “If Bittrex had not demanded, Upbit would not have made its transaction fee rate in the coin-to-coin market as high as the one of Bittrex which was the five times the rate in the Korean won market.”
It is possible to make a reasonable inference that Bittrex will take a significant portion of cryptocurrencies paid to Upbit as coin transaction fees, according to those in the cryptocurrency industry. Some say that the value of cryptocurrencies that Bittrex takes from Upbit can reach several hundred of billions of Korean won per year. Upbit's recent 24-hour coin trading volume tops 300 billion won, making 45 billion won in commissions a month.
At present, there is no legal regulation on tax imposition on cryptocurrency transactions in Korea, so there is brewing controversy not only over tax evasion but over national wealth outflow as cryptocurrencies in Korea are leaked aboard. "Our commission contract with Bittrex is confidential and cannot be specifically disclosed," Upbit explained.