Bithumb, a cryptocurrency exchange, retracted its decision to raise its deposit fee rate to an unprecedented 4.0% annual rate just 6 hours after the announcement. This reversal was due to the discovery of additional review requirements to comply with the Virtual Asset User Protection Act.
Bithumb’s Deposit Fee Rate Increase and Retraction
According to industry reports on the 24th, Bithumb announced at 5:50 PM the previous day that it would raise the existing annual deposit fee rate from 2.2% to 4.0%. This plan included adding a 2.0% fee rate on top of the 2.0% interest from its partner bank, NH Nonghyup Bank. However, by midnight, just 6 hours later, Bithumb retracted this decision, reverting to the original 2.2% rate.
Bithumb explained, “We discovered additional matters that need to be reviewed to comply with the Virtual Asset User Protection Act, leading us to retract the rate increase.” They also apologized for any confusion caused to virtual asset users. It was reported that financial authorities intervened, questioning whether a cryptocurrency exchange, rather than a bank, could independently pay deposit fees.
Overheated Competition in Deposit Fee Rates
The competition among the five major domestic exchanges over deposit fee rates has been intense since the initial announcements on the 19th. Upbit initially announced a 1.3% annual rate, but Bithumb soon countered with 2.0%, sparking a competitive response. Upbit quickly raised its rate to 2.1%, and Bithumb further increased to 2.2%. Similarly, Korbit adjusted its rate from 1.5% to 2.5% amid the heated competition.
Intervention by Financial Authorities
The Financial Supervisory Service convened representatives from the five major exchanges—Upbit, Bithumb, Coinone, Korbit, and Gopax—on the morning of the 24th to review how deposit fee rates were being determined. The Financial Supervisory Service emphasized the need to set rates reasonably in accordance with laws and regulations. According to supervisory regulations, deposit fees should be calculated reasonably, considering operational profits and costs. The authorities found Bithumb’s method of adding its funds to bank interest rates to be non-compliant with regulations.
Industry analysts suggest that the intervention was also due to concerns about funds shifting from the capital market to the virtual asset market. As of now, the deposit fee rates are Upbit at 2.1%, Bithumb at 2.2%, Coinone at 1.0%, Korbit at 2.5%, and Gopax at 1.3%.
Bithumb’s retraction is expected to temporarily halt the competitive increases in deposit fee rates, with exchanges likely to maintain reasonable rates as guided by financial authorities.
