The introduction of crypto staking services, where users can deposit their coins to earn rewards, has intensified competition among exchanges in South Korea, The Korea Times reported. This service has expanded the scale of staking into trillions of dollars and introduced service brokerage fees as a new source of income for exchanges.
Crypto Staking Gains Momentum
Staking services, where investors deposit their coins to validate blockchain networks and receive rewards, have recently gained traction in the cryptocurrency market. Unlike traditional bank deposits, exchanges do not manage the coins but act as proxies and charge brokerage fees for the service.
Upbit has reportedly surpassed 3 trillion won ($2.1 billion) in staking assets. The crypto exchange distinguishes itself by directly operating the entire staking process without outsourcing. The exchange offers staking services for Ethereum, Cosmos, ADA, Solana, and Polygon, with estimated reward rates per year ranging from 2.6 percent to 16.6 percent.
However, Upbit deducts 10 percent from the rewards as brokerage fees before distribution. On the other hand, Bithumb and Coinone, the second and third-largest exchanges in South Korea, differentiate themselves by offering daily staking services. This gives investors more flexibility in depositing and withdrawing their coins compared to traditional staking services.
Despite the popularity of staking services, experts warn of risks such as hacking and technological malfunctions. Additionally, regulatory frameworks are needed to address concerns about security and investor protection.
Enhancing Transparency
Last year, South Korea's Financial Services Commission (FSC) introduced rules mandating crypto exchanges to disclose their holdings. Under the new rules, South Korean companies engaged in holding or trading cryptocurrencies must provide detailed information about their transactions to the financial regulator.
The requirement includes disclosing the amount of digital assets held, the characteristics of these assets, and the business model. Additionally, firms must declare profits made from crypto assets and provide the market value of their holdings.
The FSC emphasized that these measures will improve transparency in accounting for digital assets held by corporations. However, the cost incurred in developing crypto assets will not be recognized as intangible assets under the new regulations.
This article was written by Jared Kirui at www.financemagnates.com.
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