[THE INVESTOR] JEJU ISLAND -- Lee Sir-goo, CEO of Dunamu, operator of one of the nation’s top three cryptocurrency exchanges Upbit, dismissed speculations that the firm could seek to launch its initial coin offering like its Chinese rivals.
“We are not considering an ICO for now,” Lee told reporters on Sept. 13 on the sidelines of the Upbit Developer Conference held on Jeju Island.
Lee Sir-goo, CEO of Dunamu
Crypto exchanges, including Binance and Huobi, are increasingly launching their own coins that can be used for paying transaction fees or participating in paid-events on their websites. Their coin prices have soared over the past months amid market fluctuations. Korea’s Bithumb is also preparing to launch its own ICO through its Singapore unit.
“Having our own coin may be convenient for our operations but that could cause a conflict of interest as an exchange that handles diverse coins,” he added.
Lee, who was Kakao CEO in 2014-15, took the helm of Dunamu in December last year amid the nation’s crypto-mania. At the time, Upbit’s daily transactions once exceeded a whopping 10 trillion won (US$8.90 billion). But the CEO has maintained a low profile as the Korean government is taking a hardline stance on cryptocurrencies, including tougher control of exchanges.
Like its big two rivals Bithumb and Coinone, Upbit has come under increased scrutiny. In May, prosecutors raided its Seoul headquarters, alleging the firm sold more coins than those it actually owned. But the firm refuted the allegations, citing its crypto reserve ratio of 103 percent and cash reserve ratio of 127 percent in a recent outside audit report.
“While the Korean government is tightening regulations against Korean exchanges, Chinese firms are gobbling up the domestic market. We faced a similar situation during the earlier days of NHN and Kakao,” he said pointing out the “reverse discrimination” against Korean exchanges here.
“It’s an ironic situation considering it’s impossible for us to do business in China.”
Below are excerpts from the question and answer session during Lee’s media interaction.
Q: There are several pending issues facing Upbit, including the ongoing prosecutorial investigation. What are your plans for the latter half?
LEE: There will be no change in our core business based on crypto exchange operations. The biggest issue for now is we cannot issue new accounts. We will continue to talk with banks in order to resolve this. Another issue is recovering our transaction volume that peaked early this year but has continued falling recently. About the ongoing probe, we are doing our best to cooperate with prosecutors.
Q: You announced an investment plan worth 100 billion won for the next three years. What’s the current situation?
LEE: When we announced the plan early this year, our transaction volume reached 10 trillion won. Since then the figure has continued to fall but there will be no change in the original plan. We have invested 20 billion won this year alone, putting money in promising projects like Codebox and Ozys that we hope could help create a healthy crypto eco-system.
Q: Some exchanges are launching their own coins. Do you have any similar plans?
LEE: We are still skeptical about the idea. Having our own coin would be convenient for our operations but that could cause a conflict of interest as an exchange that manages diverse coins. For now, we are not considering launching our own coin.
Q: What do you think of the regulatory hurdles?
LEE: It is a matter of awareness. There was a similar problem with online games. The outlook is still mixed depending on pros and cons. The government is more open to blockchain, while taking a hardline on cryptocurrencies. But we don’t think they are separate issues. Regulatory systems should be prepared as soon as possible.
Q: Foreign crypto exchanges, especially Chinese, are increasingly taking keen interest in Korean blockchain projects. What do you think about this?
LEE: Foreign firms are thriving here as the Korean government is tightening the scrutiny of local exchanges. There is much room for reverse discrimination against Korean firms. We faced a similar situation during the earlier days of NHN and Kakao.
There are ample opportunities for the nascent crypto market but Chinese firms are capitalizing on the opportunities. Of course, they allow more liquidity in the market. But would it be possible for us to do business in China now? No. It’s an ironic situation.
Q: Are you considering other blockchain-based business?
LEE: We have more than 100 employees but that’s not enough for our core exchange business. But we do have Dunamu Partners to invest in blockchain projects and Lamda to carry out research projects. We will continue to look for opportunities.
Q: How’s your partnership with Bittrex? There is some criticism about outflow of foreign currency. (Upbit uses the trading system of US-based Bittrex when it comes to overseas trading, with the two sharing the fees.)
LEE: We think we are earning foreign currency because we share transaction fees when our users trade at Bittrex. If users trade coins on China’s Binance, that’s outflow of foreign currency. Our partnership with Bittrex is a working relationship that is renewed every year. Both firms are happy with the partnership and have no plans to end it.
By Lee Ji-yoon (email@example.com