Binance Adjusts to South Korean Laws

Binance is slashing its majority stake in South Korea’s local exchange, Gopax, to around 10%. Gopax is one of the top five Won trading platforms in Korea.

The South Korean market is prepping for new laws effective July 19, as the one-year window for the Virtual Asset User Protection Act expires.

Binance to Slash Gopax Stake to 10%

Local media reported ongoing negotiations between Binance and South Korean cloud service provider Megazone to sell Binance’s majority shares in Gopax. Binance acquired a majority share of 72.6% and management rights via a stake acquisition in February 2023. For Binance, this had been a re-entry into the market after exiting in 2021, but it faced opposition from regulators.

As it happens, the sale is a regulatory imperative from local financial authorities intended to improve the Gopax platform’s governance structure. The local exchange will renew its real-name account contract with Jeonbuk Bank next month, as their two-year real-name account contract expires.

“Binance is pushing for the sale of shares to improve its governance structure as requested by financial authorities. This is to process a change report ahead of the renewal of its real-name account contract with Jeonbuk Bank in August. A conclusion will be reached within this month,” local media reported.  

Read more: Binance Review 2024: Is It the Right Crypto Exchange for You?

This is the last opportunity for Binance and Gopax to maintain their status as a won exchange. The assumption comes as Binance needs to improve its governance structure to conclude the real-name account renewal contract. It is critical for Gopax, considering its 56 billion Won worth of exposures to FTX, worsened by Bitcoin price slump.

Per the terms of the Special Financial Transactions Act implemented in June, exchanges must report real-name account renewal-related changes to the authorities at least one month before signing the contract.

South Korea Navigates New Crypto Laws

The regulatory environment in South Korea continues to toughen. The Special Financial Transactions Act in June set the stage for the Virtual Asset User Protection Act on July 19. With the new act, the Financial Services Commission (FSC), South Korea’s regulatory body, and the Bank of Korea will jointly oversee crypto operators and asset custodians in South Korea.

Crypto exchanges would also have to safeguard at least 80% of deposits in cold storage and enroll in insurance programs. These measures will guarantee the safety of user funds, with a capacity for compensation in case of security breaches.

South Korea’s Financial Supervisory Service (FSS) is also launching a 24-hour surveillance system for local exchanges starting July 19.

Read more: Crypto Regulation: What Are the Benefits and Drawbacks?

As trading platforms navigate regulatory changes, South Korea continues to solidify its position in the global crypto arena. In the first quarter (Q1) of 2024, the Won ranked the most traded fiat currency, recording up to $456 billion in trading volumes on exchanges, effectively beating the US dollar at $455 billion in volumes.