The logo of Upbit, Koreas' largest cryto exchange, is seen outside its headquaters in southern Seoul in this photo taken in December 2018. Yonhap

Upbit, Korea's largest cryptocurrency exchange, is facing accusations of monopolistic behavior, holding as much as 70 percent of market share in the country.

Critics say Upbit's dominance could undermine the crypto asset industry, as operators and traders of new digital coins will have no choice but to join Upbit if its rivals concede and close down.

However, supporters of Upbit argue that its dominance is a natural outcome of a capitalist market, suggesting that regulatory intervention could be seen as unfairly biased against the company.

The dispute came as Upbit's market share was addressed during a National Assembly audit on the Financial Services Commission (FSC) last week.

Rep. Lee Kang-il of the main opposition Democratic Party of Korea noted that Upbit's 24-hour trading volume topped $1.18 billion, thereby controlling 70 to 80 percent of the market.

It was also disputed for its link with internet-only lender Kbank during the accelerated digitalization of the finance sector.

Upbit accounts for approximately 20 percent of Kbank's total deposits, and market observers note that this could enable the exchange to exert influence over the bank, potentially posing a business risk in extreme situations.

"Controlling more than 70 percent of a market is certainly seen as a monopoly, and the financial regulator should take action for smaller competitors to thrive," Seoul-based activist group Citizens United for Consumer Sovereignty said. "It is feared that otherwise, Upbit's growth may undermine the entire cryptocurrency industry."

The group said the government has been taking anti-monopoly actions against online platform operators in a range of businesses that have a greater reliance on digital technology.

Lee Sang-geun, a professor at Sogang University's business school, voiced a different view.

"Any attempt to curb monopolies at this point can cause a bigger problem as current regulations do not stipulate anti-monopoly measures in the newly-emerging digital coin industry."

The professor suggested "incorporating the crypto asset industry into the conventional finance sector" so as to deal with relevant issues in the long term.

Meanwhile, FSC Chairman Kim Byung-hwan said he is aware of the concerns about Upbit's dominance.

He said that the FSC would look into Upbit in line with the launch of the virtual asset committee.