The adoption of crypto staking services by exchanges in South Korea has significantly heated the competitive landscape, as reported by The Korea Times.
These services, which have now escalated to handle transactions worth trillions of dollars, also generate a new revenue stream through service brokerage fees for the exchanges involved.
Crypto staking involves investors depositing their digital coins to support the operation of blockchain networks.
In return, they earn rewards based on the amount of cryptocurrency they stake.
Unlike traditional banking where funds are managed directly by the institution, in crypto staking, the exchanges merely serve as intermediaries and earn their income through brokerage fees charged for this facilitation.
A leading player in this market, Upbit, has successfully amassed over 3 trillion won (approximately $2.1 billion) in staking assets.
It operates its staking processes in-house without relying on third-party services.
Upbit offers staking options for various cryptocurrencies including Ethereum, Cosmos, ADA, Solana, and Polygon, with annual reward rates ranging from 2.6% to 16.6%.
Despite these offerings, Upbit takes a 10% cut from the earned rewards as a brokerage fee before they are distributed to the investors.
Competitors Bithumb and Coinone, ranking second and third in the market, respectively, offer distinctive daily staking services.
This model provides greater flexibility for investors, allowing them to deposit or withdraw their assets with fewer restrictions than those found in traditional staking models.
While staking services have grown popular, they come with inherent risks such as potential hacking and technical failures.
There is also a growing need for robust regulatory measures to ensure the security of investor funds and overall market stability.
In a move to boost market transparency, the Financial Services Commission (FSC) of South Korea implemented new regulations last year.
These regulations require crypto exchanges to fully disclose their cryptocurrency holdings.
Details such as the amount and characteristics of the held digital assets, the business model surrounding them, and the profits derived from these assets must be reported to the financial authorities.
Additionally, these firms are obligated to disclose the market value of their holdings.
The FSC’s rules aim to enhance the transparency of how digital assets are accounted for by companies.
However, the costs associated with the development of crypto assets will not be treated as intangible assets under these new regulations.
This change underscores the government’s commitment to improving the oversight and transparency of financial activities involving digital currencies.