"Most virtual asset corporations worldwide fall far short of the structure or scale of the Korea Exchange (KRX). The virtual asset industry changes fast and is highly startup-like. In this environment, agility matters, but when (virtual asset exchange) equity is dispersed and stakeholders multiply, decision-making and the pace of innovation inevitably slow."
Nirun Phuwattananuwong, CEO of Gulf Binance, who recently visited Korea, said this regarding the Financial Services Commission's move to limit a virtual asset exchange's controlling shareholder equity to about 15%–20%. Gulf Binance is an exchange created through a partnership between Gulf Energy, Thailand's largest private power company, and Binance Holdings Ltd.
He said he understands the government's move to define virtual asset exchanges as "public infrastructure" and to limit controlling shareholder equity. "I understand why regulators are having that discussion. Exchanges can play a systemically important role in financial markets. Equity caps can also help reduce conflicts of interest and strengthen governance," he said, but he also worried that capping equity could slow decision-making.
Thailand's virtual asset trading market is less than 5% the size of Korea's, but its legal framework is a step ahead, and internal controls at exchanges are systematic. Gulf Binance has a high degree of cooperation with regulators and frequently conducts joint investigations with police into virtual asset–related crimes.
Phuwattananuwong said it is natural that Naver or Mirae Asset Global Investments are discussing cooperation with virtual asset exchanges such as Dunamu and Korbit. In Thailand, institutional investing is already underway, and regulations on virtual asset exchange-traded funds (ETF), futures, and other options trading are being discussed.
He said, "The virtual asset trading market can only mature when institutions come in." The following is a Q&A with Phuwattananuwong.
─Gulf Binance is not a simple overseas branch but a collaboration with a major Thai corporation.
"Globally, Binance Holdings Ltd.'s core strategy starts with complying with regulation based on local licenses in key markets. In markets with clear regulation, such as Thailand or Korea, you need the right licenses to do business properly, and it is not easy for a global operator to enter directly. In Thailand, a partnership opportunity arose with the major corporation Gulf Energy."
─What synergies have you gained by forming a joint venture with a traditional infrastructure corporation?
"The joint-venture structure was very effective. At the time, Binance Holdings Ltd. had no presence in Thailand, and financial authorities were wary of overseas operators. Gulf, on the other hand, had long-standing experience and trust in the Thai market and knew well how to communicate with the government and authorities. This formed the infrastructure for Binance Holdings Ltd. to establish itself in Thailand, and we are building solidly not only in market performance but also in our relationships with the authorities."
─If the Korean government limits controlling shareholder equity in exchanges, Binance Holdings Ltd. would also need to sell its equity in GOPAX.
"If that rule is legislated, Binance Holdings Ltd. will, of course, respect and comply with it. However, if the authorities' fundamental concerns are governance or conflicts of interest, measures such as controlling shareholder suitability reviews, an independent board, and regular audits could also serve as tools. I think an equity cap may be somewhat strong relative to the issue.
Most overseas global exchanges are not subject to such equity regulations. If such rules apply only in Korea, domestic operators could be disadvantaged in competition with global exchanges." If and when the time comes to be established as public infrastructure on par with a securities exchange, as the authorities are considering, equity limits would be necessary, but it may be too early yet."
─Can suitability reviews or other regulations meet both the corporate responsibility the authorities require and exchange innovation?
"Yes. In Thailand, the Securities and Exchange Commission conducts strict suitability reviews of key figures such as the exchange's board, management, and ultimate beneficial owners, and it also grants approval before appointments. Suitability review is only one way to address corporations' social responsibility, and the authorities require various mechanisms such as an independent board and audit committee, risk management functions, regular audits, and internal control rules."
─Thailand is discussing expanding virtual asset ETFs and options products such as futures.
"The reason for discussing ETFs is to create regulated investment products in Thailand. It can be seen as a move to enhance Thailand's competitiveness in global markets. The same goes for futures. In global markets, futures trading is far more active than spot, and if you block products with demand, activity will inevitably move overseas. That is why the Thai government is allowing them and putting in place investor protection measures. This way, even if problems arise, they can be addressed domestically."
─A wider array of products appears likely to strengthen inflows of institutional funds.
"Virtual asset trading still has a large share of retail customers. They tend to be short-term and speculative, whereas institutions scrutinize virtual asset firms' governance and internal controls. Inflows of institutional funds help stabilize the market and are positive for market expansion."