A screen shows the price of bitcoin at a virtual currency exchange store in Seoul, South Korea. (Photo by Seung-il Ryu/NurPhoto via Getty Images)
A report confirming that bitcoin exchange UPbit, now the biggest crypto exchange in South Korea, is storing 100% of its bitcoin and cryptocurrency balance sheet has sent a wave of relief over worried investors after the exchange was raided by local authorities in May.
At the time there were concerns UPbit was manipulating its balance sheet and inflating its trading volumes.
As part of the raid South Korea's financial watchdog, the Financial Services Commission (FSC), along with the Korea Financial Intelligence Unit (KFIU), seized hardware and documents from UPbit to evaluate claims from unknown sources that the exchange was insolvent.
Yoojin, one of South Korea's largest accounting firms, was hired to evaluate UPbit's accounts and found it to have the required funds, but questions remained over the legitimacy of the findings as the Korean government did not release a statement or additional information on the case.
Now, Dunamoo, a subsidiary company of Korean internet giant Kakao, has released a report citing the official audit results — something that goes a long way to verifying Yoojin's findings — and somewhat laying to rest fears of another South Korean crypto exchange collapse.
"UPbit currently has the exact amount of money held by the platform’s investors along with additional funds, more than enough to compensate every investor," said Lee Seok-woo, the president of Dunamoo. "Hence, UPbit is able to process withdrawals for customers upon the request of its customers and the exchange will continue to release audit reports on a regular basis to prove its solvency.”
Problems for South Korean crypto exchange Bithumb in recent months has led to UPbit overtaking it as the largest exchange in the country, though UPbit might not hold the title long — many expect the Shinhan Bank-backed exchange Gopax to soon dominate the South Korean market.
The news out of South Korea follows other bullish news this week for the bitcoin price — though the bitcoin bears have yet to be chased away.
The bitcoin price has been struggling in recent weeks after a sell-off drove the price down from recent highs of almost $8,500 to around $7,000.
The bitcoin price rallied last month before giving up gains.CoinDesk
On Friday it was revealed that U.S. coffee chain Starbucks is keen on bitcoin and cryptocurrency, which some think potentially paves the way for the approval of the Securities and Exchange Commission's (SEC) bitcoin exchange-traded fund (ETF).
Starbucks, the New York Stock Exchange owner Intercontinental Exchange (ICE), software giant Microsoft and Boston Consulting Group are teaming up to launch a digital platform called Bakkt that could mean Starbucks customers can indirectly use bitcoin and other cryptocurrencies at the coffee chain's stores.
Starbucks was quick to point out that it will not be accepting bitcoin or other cryptocurrencies as payment, despite misleading reports from many credible publications, including Bloomberg.
A Starbucks spokesperson told Motherboard “customers will not be able to pay for Frappuccinos with bitcoin,” but they will be able to “convert digital assets like bitcoin into U.S. dollars, which can be used at Starbucks.
“At the current time, we are announcing the launch of trading and conversion of bitcoin", the spokesperson said. "However, we will continue to talk with customers and regulators as the space evolves."
Many think this is still a step in the right direction for bitcoin and crypto adoption, however.
"They'll now have a U.S.-regulated exchange and they have a licensed warehouse, which is how commodities are stored and that's going to make it a lot easier for an ETF to come through," BK Capital Management founder Brian Kelly told CNBC over the weekend.
The SEC's ETF decision, which could come later this month, could push the bitcoin price far above the near $20,000 highs it reached at the tail end of last year.
Billy Bambrough Contributor