[Executive Summary]

• Dunamu, the operator of Upbit which is the largest crypto exchange in South Korea, had a significant decrease in its 1Q sales in 2022. The reason is likely to be the ongoing economic downturn and expanding business of Upbit and its affiliates.

The 1Q operating profit of Dunamu, the operator of Upbit, fell by 46% when compared to the 1Q 2021, due to the withering of the investor sentiment toward VAs. According to Dunamu’s quarterly report released on May 30th, the consolidated operating profit in the 1Q 2022 fell by 46% when compared to the consolidated operating profit of 1Q 2021. For the same period, Dunamu’s sales also fell by 28% when compared to the same period in 2021. In this regard, Dunamu said that the investor sentiment shrunk because of the macroeconomic downturn, and such has been reflected in the VA investment; consequently, the transaction volume of Upbit fell, decreasing the trading fee and the operating profit.

The net profit of 1Q of 2022 also fell by 64% when compared to 1Q 2021. However, Dunamu’s operating expenses increased by 148%. Dunamu explained that such an increase is because the number of employees of Dunamu doubled, and Dunamu’s subsidiaries/affiliates such as Lambda256 are expanding their business. Recently, KoFIU started on-site auditing of Upbit, allegedly checking Upbit users’ individual wallets based on the Travel Rule. This is likely to add a burden on Upbit’s business for a while.

• The Changes in Dunamu’s Expenses and Profits (Unit: billion KRW)

Numerous VAs in the Korean market have experienced a decrease both in their price and trading volumes. It seems reasonable to expect other Korean exchanges to mirror the trend that Upbit has experienced, for it is one of the largest digital asset exchanges in South Korea.