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Coinone has scrapped all trading fees just days after rival Digital X did the same, turning a market share contest among South Korea’s cryptocurrency exchanges into a race to the bottom.
Coinone eliminated trading fees on all listed tokens starting at 11 a.m. on the 26th, until further notice, according to financial industry There is no limit on who can claim the vouchers or how many times, effectively making the waiver open-ended
The move came only two days after Digital X announced on the 24th that it would waive trading fees on all tokens for one year. Coinone’s response is seen as an attempt to hold onto third place in the market and fend off Digital X, the fourth-ranked exchange, which has turned aggressive since Mirae Asset Group took control.
With two exchanges playing the zero-fee card in quick succession, analysts worry the competition for market share is turning self-destructive. South Korea’s market is close to a zero-sum game in which exchanges poach a fixed pool of customers from one another, since foreign participation is restricted and spot trading is the only product available. Industry officials say Mirae Asset has ignited a game of chicken by leaning on its capital base to offer a sweeping fee waiver.
Fees are effectively the entire revenue base for crypto exchanges. Fee income accounted for 100% of Coinone’s total operating revenue last year and 99.99% at Digital X, according to regulatory filings. The picture is little different at the two market leaders. In the first half of this year, fees made up 96.9% of total operating revenue at Dunamu, which operates Upbit, and effectively 100% at Bithumb.
Adding to the strain, earnings have already deteriorated sharply amid a recent drop in trading volumes. Operating profit at Dunamu and Bithumb each plunged by around 80% in the first half. Smaller exchanges with thinner volumes, including Coinone, Digital X and Gopax, have been in the red for years. Because the exchanges are forgoing fee income just as a reviving crypto market offered a chance to expand it, the longer the waivers last, the heavier the hit to profitability. The fee war may benefit customers for now, but if it erodes exchange earnings, it could lead to poorer service quality and reduced spending on security.
“When excessive competition among financial firms threatens their soundness, regulators can step in, but there is no equivalent regulatory framework for crypto operators,” a senior financial industry official said. “It will not be easy for the authorities to intervene.”
#Coinone#DigitalX#CryptoExchange#ZeroFees#Dunamu#Bithumb
Original reporting by Kim Jung-woo for Seoul Economic Daily.
AI-translated from Korean. Quotes from foreignxact original wording
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