South Korean Regulator Designates Crypto Exchange Bithumb as a Conglomerate

The South Korean Fair Trade Commission (FTC) has classified the crypto exchange Bithumb as a conglomerate. The designation will force the company to adhere to a range of financial compliance rules.

Per Jeongi Shinmun, Bithumb was one of just five companies added to the FTC’s list of conglomerate companies and business groups on May 1.

The South Korean government has two separate conglomerate categories. The first is the “large conglomerate” category, which is subject to the strictest level of public disclosure regulations.

South Korean law requires “large conglomerates” to abide by more comprehensive financial disclosure requirements than regular firms.

Companies with this designation must post regular reports on the status of their stock holdings. The designation also requires directors and their family members to comply with strict expropriation rules.

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And firms in a second “conglomerate” category must adhere to investment and cross-holding rules. The government created the rules to prevent powerful companies from buying significant quantities of shares in stock exchange-listed firms.

The FTC had previously ruled that the Bithumb rival Upbit qualifies as a “large conglomerate.” In May 2022, the body named Upbit’s operator Dunamu the South Korean crypto sector’s first official “large conglomerate.”

It upheld its ruling in 2023 and 2024, but this year moved the operator into the lower “conglomerate” category, along with Bithumb.

Both designations place a range of restrictions on company activities. They prevent, for instance, companies from making equity investments or loan guarantees with their affiliates and subsidiaries.

Bithumb was one of just five companies added to the “conglomerate” list this year. The FTC also named the weapons-maker LIG, the real estate player Daekwang, the food manufacturer Sajo, and the shipping firm EUKOR.

South Korea’s Fair Trade Act contains several clauses pertaining to corporations. Most of these were created in response to the rise of chaebol business groups.

Chaebol groups are typically large, family-run companies with a wide range of business operations. Examples include Samsung, LG, and CJ.

Critics claim that these groups wield excessive power in the business and political space, giving little room for smaller firms to operate.

The act prohibits larger domestic companies from providing unfair benefits to “special related parties.”

Its investment-related clauses were originally designed to stop the phenomenon of “circular investment,” whereby company owners obfuscate their financial activities by investing in their own subsidiaries.

The FTC explained that both Bithumb and Upbit were placed on the list because of a sharp rise in crypto trading in late 20224.

The body wrote that at around the time of the US Presidential Election, the volume of customer deposits on domestic exchanges increased rapidly.

The FTC’s rulings on crypto exchanges have attracted criticism from some detractors. The agency calculates the worth of firms’ total asset holdings when making its evaluations.

Some claim that, as most exchanges hold more crypto than fiat, it is hard to ensure the accuracy of these calculations.

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