Binance, the world's largest virtual asset exchange, has been approved as the major shareholder of the won-based domestic exchange Gopax, clearing the way for entry into the Korean market. Gopax plans to begin normalizing the exchange, starting with the defeasance of the long-delayed GoFi debt. As many people use foreign exchanges via domestic platforms, there is a possibility that the dominance of Upbit, which accounts for 70% of domestic trading volume, could face changes.
According to the virtual asset industry on Oct. 19, Gopax on Oct. 16 announced through a notice that its report on changes to the Gopax board of directors had been accepted. Gopax said it is closely cooperating with current major shareholder Binance to secure funds for the repayment of GoFi deposits and to obtain consent from minority shareholders, among other follow-up procedures, which it is reviewing step by step, and that it will provide guidance on the schedule and method later. GoFi is a deposit service that pays interest when an investor entrusts virtual currency to Gopax. When the global exchange FTX went bankrupt, the GoFi operating firm also went bankrupt, and Gopax has not recovered the losses to date.
Domestic virtual asset exchanges do not have a separate suitability review for major shareholders, but they are required to report changes in representative executives to the Financial Intelligence Unit (FIU) of the Financial Services Commission. Although it appears to be a simple acceptance of executive changes, in effect the authorities use this to conduct a de facto suitability review of major shareholders. In March 2023, immediately after acquiring Gopax in February 2023, Binance reported changes as Gopax executives, but acceptance was delayed for two and a half years due to reasons such as a major shareholder suitability review and a review of the anti-money laundering (AML) system.
In particular, financial authorities had been concerned about legal risks surrounding Zhao Changpeng, the former CEO and founder of Binance. Binance was fined $4.3 billion (about 6 trillion won) by the U.S. Securities and Exchange Commission (SEC) and the Department of Justice for alleged violations of anti-money laundering (AML) rules and improper use of customer funds. This also led Zhao Changpeng to step down as CEO. However, since the first half of this year, as regulatory risks for Binance have eased in the United States and operations have resumed, the mood is said to have shifted.
Binance has long been interested in the Korean market, as Korea's virtual asset market trading volume is among the largest in the world. In 2020, Binance established an exchange called "Binance KR" and even issued its own won-based stablecoin. However, due to failures in real-name account issuance and AML, it withdrew after two years with the enforcement of the Act on Reporting and Using Specified Financial Transaction Information.
Korean investors are also highly interested in using overseas exchanges. Unlike in Korea, overseas exchanges allow trading of various virtual asset derivatives such as futures and options, which are high-risk, high-return investments. Even for so-called "staking (deposit)," where virtual assets are locked up for a set period in return for fixed rewards, overseas exchanges offer higher interest rates. Among them, Binance, which has the world's top liquidity, supports a wide range of product transactions and is considered one of the overseas exchanges most used by Korean investors.
Investors cannot open accounts directly on overseas exchanges with won, so they first buy stablecoins such as USDT (Tether) or USDC (Circle) on domestic exchanges and then transfer them out to overseas exchanges. According to the office of Park Soo-young of the People Power Party, a member of the National Assembly's Strategy and Finance Committee, about 124.3 trillion won flowed out from Korea's five major virtual currency exchanges (Upbit, Bithumb, Korbit, Coinone, and Gopax) to overseas virtual currency exchanges from January to September. This is close to last year's annual outflow (125.8 trillion won) and 2.7 times the level of two years ago, in 2023 (45.5 trillion won).
However, Binance's approval as a major shareholder does not immediately lead to exchange system linkage with Gopax. For liquidity and other reasons, system linkage with overseas exchanges, such as sharing an order book (order window), is only possible with separate authorization from the Financial Services Commission. Bithumb, considered the No. 2 in the industry, recently shared an order book with the Australian exchange "Stellar" to secure liquidity, and authorities have launched an investigation into whether there are any violations.
In addition, many believe that in Korea, which bans high-risk trading such as leverage and is even creating guidelines, the various derivative transactions offered by Binance will not be allowed, or if allowed, only to a very limited extent. An industry official said, "Although it will be difficult to challenge the position and overwhelming market share that Upbit already holds in Korea, Binance will not remain idle now that it has been approved as Gopax's major shareholder," adding, "Through marketing such as Binance's exceptionally low transaction fee benefits in the 0.01% range or offering remittance fee benefits when depositing from Gopax to Binance, inflows into Gopax could be significantly increased."