Binance, the world’s largest crypto exchange, has had its eye on the Korean markets for a while. A deal with Gopax is the breakthrough that the leading exchange was anticipating.
Gopax is one of the top five leading crypto exchanges (Upbit, Bitsum, Coinone, Corbit, and Gopax) in South Korea. The exchange reportedly saw success locally in its early days but, later in 2022, had a liquidity crunch after the FTX bankruptcy.
The exchange services are not available to non-Korean residents following a law that prevented non-citizens from trading crypto provided by entities residing in the country.
Binance conducts Gopax due diligence.
According to a report by Decenter, the leading exchange has completed the exchange’s due diligence. They were to announce Christmas but rescheduled pending the stake valuation.
The exchange will buy a 41.2% stake in the exchange from the exchange’s largest shareholder, its CEO Lee Jun-haeng.
The exchange’s most significant obstacle in entering the Korean market was strict regulatory requirements by its financial authorities. Acquiring the Korean exchange is a workaround that has a high chance of success.
The exchange reportedly used similar tactics to enter the United States market by establishing Binance.US for the country’s citizens.
Upbit exchange dominates the Korean crypto market; the exchange’s entry into the market will prove a worthy rival noting its substantial capital. Upbit currently dominates 80% of the entire market, while the Korean exchange maintains a meager 0.1%.
Due to the recent collapse of Terra Luna and the controversy over the distribution of Wemix, we are putting strict standards on listing, centered on Daxa (the five exchange consultative body), but if Binance participates in Daxa indirectly through Gopax, they may loosen the listing requirements.
Daxa officials
The acquisition is not the first attempt to enter the Korean market. The exchange had established Binance Korea earlier and acquired a stake in the Sakura cryptocurrency exchange.
The two exchanges are yet to release official statements on the acquisition.
Acquisition implication
If the acquisition is complete, the leading exchange will have higher prospects of entering the local market in East Asia. The acquisition will also widen the exposure of the local market to foreign investments.
Upbit will have a worthy rival who might as well beat them with time. The exchange has substantial capital and over 350 listed cryptocurrencies outshining Upbit, which has half as much. These two factors provide investors the incentive to jump ship.
Analysts suggest that Binance’s entry into the country will profoundly impact regulation. Daxa will ease listing standards as the exchange expands its trading stocks, and other exchanges might try to cover more stocks to keep up with the competition.
Binance participation will resurface the derivative discussion. Exchanges in the country operate mainly on spot trading; Binance, on the other hand, provides a diverse portfolio of investments, such as futures. According to Korean law, transferring derivatives across the exchanges is challenging, said Kwon Oh-hoon, a partner attorney at Cha & Kwon Law Firm.
Closing thoughts
Binance entry into the Korean market seems like a good investment; it is, however, worth noting that they will still have to overcome numerous hurdles by authorities to set up shop.
Since the collapse of FTX, Binance has charted how exchanges should operate; by leveraging this strength, the exchange has significant opportunities in the future.
Binance has a growing web of investments globally, bringing the question of the impact it would have if an FTX-like catastrophe occurred.
