Regulatory restrictions and technical complexities remain significant obstacles, making implementation challenging in the short term. However, declining trading volumes and intensifying global competition suggest that both centralized exchanges must seek new growth drivers. 1. Ready, Set, Launch: The CEX-Led Infrastructure Race Begins Centralized exchanges (CEXs) have jumped into the blockchain infrastructure race. Coinbase launched Base, Kraken launched Ink, and Robinhood recently joined the fray. Competition is intensifying. This fierce competition stems from the limitations of the fee-based business model. Centralized exchanges (CEXs) rely on fees as the most stable source of revenue in the cryptocurrency industry. However, these models are heavily dependent on market conditions. This has created a need for revenue diversification. Furthermore, CEXs previously competed only in limited regulatory jurisdictions. Now, the competitive landscape has expanded globally. DEXes have also challenged centralized platforms, capturing over 25% of the market share at their peak. Meanwhile, mainstream adoption of cryptocurrencies is accelerating. This has opened up new business opportunities beyond trading for CEXs leveraging blockchain infrastructure. These changes will accelerate the competition among CEXs to launch their own blockchains. 2. What if Upbit and Bithumb launch their own blockchains? CEXs around the world are racing to launch their own blockchains. This naturally raises the question, "Will South Korea's major CEXs, Upbit and Bithumb, follow suit?" To assess this possibility, we need to examine the current state of these CEXs and their previous attempts. South Korea holds a unique position in the global cryptocurrency market. The South Korean won (KRW) ranks second only to the US dollar (USD) in trading volume among global fiat currencies, sometimes even surpassing it. No other country boasts such high trading volumes. This market environment has enabled Upbit and Bithumb to grow into large companies (South Korea defines a large company as one with assets exceeding 5 trillion won). However, this structure is changing. Trading volume on South Korean centralized exchanges has been declining since reaching an all-time high in 2021. Local users are migrating to global centralized exchanges or decentralized exchanges (DEXs) like Binance and Bybit. This means that South Korean centralized exchanges are gradually entering an environment where they can no longer rely solely on the Korean liquidity premium. South Korean centralized exchanges (CEXs) have noticed these changes. Both Upbit and Bithumb are attempting to expand globally through overseas subsidiaries and business diversification. However, relying solely on the "Korean CEX" brand name struggles to gain a competitive advantage abroad. They have launched various platform-based businesses, most of which have failed. These businesses lack relevance to the CEX's core strengths. Regulatory sanctions have also limited diversification efforts. The winds of change are blowing. Trump's pro-cryptocurrency policies have improved the global regulatory environment. Centralized exchanges (CEXs) can now more aggressively pursue new growth strategies. Against this backdrop, launching their own blockchains has become a viable option for Upbit and Bithumb. If they launch their own blockchains, the results can be expected to be different. They can directly leverage their strengths: a large user base and ample liquidity. South Korea's unique market characteristics further enhance the potential for creating differentiated value. Scenario 1: Building a Layer 2 Network Based on the OP Architecture If these centralized exchanges build their own chains, they may choose Layer 2 over Layer 1. The main reasons are development complexity and required resources. Layer 1 development and operation require significant resources. While Rollup services have lowered the barrier to entry, Layer 2 still requires significant expertise. Kraken's Ink project involves approximately 40 developers. For centralized exchanges, independently building and operating this type of infrastructure is a heavy burden. Their goal is to expand their platform's business through infrastructure, rather than building high-performance infrastructure in-house. Regulatory risk further complicates the situation. Layer 1 blockchains require the issuance of native tokens, but South Korea's regulatory environment makes token issuance nearly impossible and carries severe regulatory penalties. Therefore, Layer 2 models that operate without native tokens, following Coinbase's example, have become the most viable alternative. While there are various architectures for Layer 2 development, global centralized exchanges (CEXs) have adopted the Optimism (OP) Stack as the de facto standard. Coinbase's Base and Kraken's Ink are both built on this foundation, serving as a reference model for CEXs. Robinhood chose Arbitrum due to different strategic objectives. Coinbase and Kraken are committed to expanding a broad ecosystem through interoperability, while Robinhood is focused on bringing financial services to the blockchain. Arbitrum's greater customization flexibility may be a better fit for this model. Upbit and Bithumb share similar goals to Coinbase. Both centralized exchanges must leverage their large user bases to expand on-chain services to overcome the limitations of their fee-based models and generate new revenue streams. Openness and interoperability are crucial to this expansion. Therefore, if Upbit and Bithumb launch their own public chains, the most likely choice would be a public Layer 2 network based on the OP Stack. Expected Scenario 2: Korean Won Stablecoin Infrastructure Another scenario for Upbit and Bithumb to launch their own chains is to build dedicated infrastructure around the Korean Won stablecoin. Both centralized exchanges are actively investing in the stablecoin market. Upbit and Bithumb have applied for trademarks related to stablecoins. Upbit has officially announced plans to enter the Korean won stablecoin market through a partnership with Naver Pay, South Korea's leading mobile payment service. Given that Upbit is the most likely candidate, the reality is that Naver Pay will issue the won-based stablecoin, while Upbit will provide the blockchain infrastructure. This structure complies with the Virtual Asset User Protection Act, which prohibits CEXs from trading virtual assets issued by themselves or their affiliates. In this case, the key lies in building infrastructure specifically for stablecoins. They can differentiate their services by adding real-world payment and privacy features. The network could be designed to use the Korean won stablecoin for transaction fees. This is similar to the Arc Network model for USDC. The goal is to create an ecosystem where all transactions revolve around stablecoins. This structure provides users with stable costs while creating sustainable demand for the Korean won stablecoin. However, this approach has technical limitations. Optimism defaults to using Ethereum for transaction fees and has discontinued support for custom fee tokens. Therefore, a customizable Arbitrum-based Layer 2 or a Layer 1 using the Korean won stablecoin as its native token may be a more suitable option. Scenario 3: Strategies for Leveraging South Korea's Liquidity Premium One strategy Upbit and Bithumb could explore is leveraging South Korea's liquidity premium. South Korea currently boasts significant liquidity, ranking second globally in terms of fiat currency. However, this liquidity remains confined to the internal systems of centralized exchanges. Centralized exchanges can issue wrapped tokens like upBTC and bbBTC based on deposited assets. Coinbase's cbBTC is a prime example. These wrapped tokens can be used on other chains, but if the platform offers convenient features like one-click integration within its app, users are likely to stay on the chain the CEX is built on. This attracts project teams to build within these ecosystems to gain liquidity. Active ecosystems enable CEXs to generate infrastructure-based revenue. CEXs can also directly test alternative business models, such as using wrapped tokens for lending. Scenario 4: Entering the Pre-IPO Stock Tokenization Market Another strategy Upbit and Bithumb could choose is to enter the pre-IPO stock tokenization market. Upbit already operates a pre-IPO stock trading platform through Ustockplus and has accumulated experience. However, this is still a P2P matching model, where buyers must respond to sell orders. Without a counterparty, trades cannot be completed. This model suffers from low liquidity and unpredictable execution. Tokenizing pre-IPO stocks on a separate chain changes this dynamic. Tokenized shares can be continuously traded through liquidity pools or market makers. Ownership transfers are automated and transparently handled through smart contracts. Beyond simple trading efficiency improvements, features such as automatic dividends, conditional trades, and programmable shareholder rights can also be implemented on-chain. This enables the design of financial products that are impossible with existing securities systems. Naver's recent acquisition of Dunamu's Ustockplus stake is noteworthy. Upbit can provide the blockchain infrastructure, while Naver will be responsible for platform operations and physical stock management. This structure works well within current regulatory constraints. This approach separates trading infrastructure from securities management, reducing institutional risk. It enables entry into the tokenized market while addressing the limitations of existing services. We have explored various potential scenarios for Upbit and Bithumb's own blockchains. However, many practical obstacles remain. The most significant constraint is regulation. South Korea's proactive regulatory approach makes it difficult to launch services not clearly defined by law. The two centralized exchanges face an increased regulatory burden after being designated as large conglomerates. Furthermore, they lack Web3-native leaders like Base's Jesse Pollak. Technical complexity adds another layer of difficulty. The likelihood of these chains being implemented in the short term remains low. However, these attempts remain promising. Domestic trading volume in South Korea has been declining since its peak in 2021. Global competition continues to intensify. A fee-based model alone clearly has growth limits. Previous attempts to diversify revenue have failed to yield significant results. Sustained growth requires new drivers. A bold attempt to build one's own blockchain could be one pillar. This represents the most viable business diversification strategy, leveraging their competitive advantages: user base and liquidity. Furthermore, these possibilities require a shift in regulatory attitudes to become a reality. With policies supporting healthy market development and institutional flexibility, Upbit and Bithumb can more actively conduct various business experiments. This may become an opportunity to enhance the competitiveness of South Korea's entire blockchain ecosystem, not just the growth of these two centralized exchanges.
Coinlive 
nftnow
decrypt
Others
Bitcoinist
Cointelegraph