Bithumb Resurrects Order Book Sharing: A Game-Changer in South Korean Crypto?

Bithumb, one of South Korea's leading cryptocurrency exchanges, has taken a bold step to revive order book sharing despite persistent regulatory restrictions. This strategic move has raised eyebrows, challenging the dominance of Upbit and aiming to attract back South Korean investors who have increasingly turned to overseas exchanges. Industry analysts speculate whether this development could signal a resurgence of order book sharing in the South Korean crypto market—a practice largely abandoned due to stringent financial regulations.

A High-Stakes Gamble Amid Regulatory Pressures

Bithumb's decision to re-enter the order book sharing arena reflects a calculated gamble to regain market share and bolster liquidity, even as it faces possible regulatory backlash. This choice has reignited debates about the feasibility and risks of order book sharing in South Korea, which could have lasting implications for the local digital asset market. By bringing this mechanism back into play, Bithumb is charting a path fraught with challenges but loaded with potential market impact.

Partnership with BingX Subsidiary: Reviving Cross-Exchange Liquidity

On October 22, Bithumb announced the launch of its Tether (USDT) market, coupled with a strategic partnership with Stellar Exchange, the Australian subsidiary of global crypto platform BingX. This partnership reintroduces order book sharing to South Korea. Smaller exchanges like Stellar Exchange often leverage such arrangements to tap into the liquidity pools of larger exchanges, thereby enhancing trading volume and providing better market conditions for users.

Historically, order book sharing has been a critical tool for smaller exchanges worldwide to improve liquidity. In South Korea, Upbit initially partnered with U.S.-based Bittrex to establish itself as a market leader. Other examples include Aprobit's collaboration with Bitfinex and Binance Korea’s partnership with its global parent Binance. However, these initiatives were rolled back following changes in South Korea’s regulatory framework.

The 2021 enforcement of the Specific Financial Information Act, or "Special Act," introduced strict anti-money laundering (AML) requirements that effectively ended order book sharing in the country. While some exchanges were previously allowed to maintain conditional partnerships with foreign entities that adhered to strict AML and Know Your Customer (KYC) standards, all such arrangements were eventually dismantled. Upbit adapted by pursuing an independent strategy, consolidating its position as the market leader. Meanwhile, Binance Korea exited entirely, and Aprobit surrendered its cryptocurrency operator license in 2022.

Bithumb’s Motivations and Investor Reactions

Industry insiders believe Bithumb’s pivot to revive order book sharing stems from a desire to compete more effectively with Upbit, which maintains an overwhelming market share. Interestingly, Upbit itself leaned heavily on order book sharing during its early growth stages. For Bithumb, this strategy could not only chip away at Upbit’s dominance but also expand its appeal to South Korean investors increasingly drawn to international exchanges offering wider product portfolios.

However, the move has provoked mixed reactions from investors. Skeptics point to potential regulatory pitfalls, such as heightened money laundering risks and ambiguities in compliance. Although Bithumb claims it is working closely with financial regulators, critics were quick to highlight the controversy surrounding Stellar Exchange. Speculation about Stellar's legitimacy arose from reports mistakenly identifying it as an independent, unauthorized operator. Moreover, regulatory concerns were magnified when Bithumb’s CEO, Jae-Won Lee, was summoned for questioning shortly after the announcement, with some branding the initiative a "reckless gamble."

The Potential to Reshape South Korea’s Crypto Landscape

Despite the controversies, many observers remain optimistic about the potential benefits of Bithumb’s move. Some believe it could rejuvenate South Korea’s relatively conservative cryptocurrency market by fostering innovation and competition. By challenging Upbit’s entrenched dominance, Bithumb could create a more dynamic and competitive environment that benefits investors through improved trading conditions and enhanced liquidity.

Byun Chang-ho, the operator of the Telegram-based crypto community "Coin Military Academy," expressed support for the revival of order book sharing. He remarked, “Bithumb’s move has disrupted Upbit’s monopoly, offering real users a better trading environment and tangible benefits.”

This shift comes on the heels of Bithumb introducing a lending service earlier in the year, which also faced criticism from the Digital Asset eXchange Alliance (DAXA). Nevertheless, Bithumb appears committed to breaking away from the risk-averse norms of the local market by pursuing experimental strategies that challenge existing industry dynamics.

What Lies Ahead: Turning Point or Future Risks?

Whether Bithumb’s gamble will succeed in reshaping South Korea’s cryptocurrency exchange market remains uncertain. Much depends on the response from regulators and how aggressively competitors like Upbit defend their market positions. This high-stakes move underscores the volatile and competitive nature of the cryptocurrency industry, where innovation often collides with the weight of regulatory scrutiny.

As Bithumb moves forward, its efforts could either establish a new precedent for market dynamics in South Korea or invite intensified scrutiny from financial watchdogs. Regardless of the outcome, Bithumb’s bold strategy has thrust the concept of order book sharing back into the spotlight, making it a pivotal moment in the evolution of the domestic digital asset market.