Demand for cryptocurrencies in South Korea has declined over the past 24 months (Image: Shutterstock)

In brief The revenues of South Korean exchanges UPbit and Bithumb dropped by 70% and 63% respectively in the past year.

UPbit’s parent company saw a sharp decline in profits of around 93%, coming after a high-profile security breach in November 2019.

The monthly volume of South Korea’s top crypto exchanges has dropped by 60-80% on average.

UPbit and Bithumb, South Korea’s two largest crypto exchanges by daily trade volume, saw their sales drop by 70% and 63% respectively since 2018.

Year-over-year, the annual profits of Dunamu, UPbit’s parent company, dropped by 93% to $7.4 million, according to the Financial Supervisory Service (FSS)’s electronic notice system.

This substantial decline in revenues of both companies is mainly attributed to the noticeable decrease in demand for cryptocurrencies in the local crypto market over the last 24 months.

Crypto volume drops sharply in South Korea

During the peak months of 2017 and 2018, Bithumb processed around 1.2 million BTC worth of trades per month, equivalent to about $7.2 billion.

However, during the peak months of 2019 and 2020 in terms of price and volatility, Bithumb processed around 300,000 BTC worth of trades. That indicates a 75% drop in monthly Bitcoin trade volume between 2017 and 2018.

Similarly, UPbit also saw its monthly Bitcoin trade volume drop from 1.35 million BTC in 2017 to around 250,000 BTC in 2020. Throughout the past two years, UPbit recorded an average monthly volume of 200,000 BTC.

As the price of Bitcoin struggled to move towards its record high of $20,000 since late 2017, the volume of all major cryptocurrency exchanges in the country, including Korbit, Coinone, and Gopax, dropped by 60-80%.

Monthly Bitcoin volume on UPbit since late 2017 (Source: UPbit

The sharp drop in revenue among top crypto exchanges in South Korea comes after two years of stagnant growth in local markets and high-profile legal cases faced by UPbit and Bithumb.

As Decrypt reported in December 2019, Bithumb was slapped with a $67 million tax bill from the National Tax Service for facilitating trades for foreign users. UPbit was charged with faking trade volume, which it has vehemently denied.

The two exchanges also faced hacking attacks, with UPbit experiencing a $50 million hack just four months ago.

Will South Korea’s crypto legislation make a difference?

The approval of the Special Financial Information Law by the National Assembly of South Korea has been seen as legitimizing the local crypto exchange market.

Whether the bill is sufficient to revive South Korea’s appetite for cryptocurrencies in the short to medium-term remains uncertain. Prior to the passing of the legislation, local investors were able to trade cryptocurrencies with no major roadblocks, as the country’s top exchanges secured contracts with leading financial institutions.