Regulators may require Binance, the leading crypto exchange, to reapply for certification following the acquisition of Gopax, as reported by Chosun Biz. The report suggests that the financial authorities are concerned about the high risk of financial crimes, such as illegal money laundering and large-scale damage to investors, due to the lack of transparency in Binance’s overall management structure.
Binance’s Entry Into The Korean Market
A high-ranking official from the financial authorities commented that Binance’s entry into the Korean market could result in the outflow of national wealth through the distribution of unverified overseas listed coins.
If Binance starts an exchange business in Korea, it will be difficult to properly manage and supervise it, and there is a possibility of outflow of national wealth through the distribution of several unverified overseas listed coins. We are considering regulating it.
Binance is set to enter the country by acquiring a 40% stake in Gopax, the fifth-largest exchange in Korea, and replacing key executives with Binance personnel.
The financial authorities are considering measures to re-accredit Gopax as a virtual asset operator (VASP) or regulate it by not giving out real-name accounts at commercial banks.
Jeonbuk Bank is said to be contemplating whether to continue providing accounts to Gopax even after the leading exchange’s acquisition becomes official. The exchange has veiled most of the company’s information, and its basic corporate governance and financial information are not disclosed.
The lack of transparency has led to concerns that the exchange could be exposed to similar risks as FTX, the world’s third-largest exchange, which declared bankruptcy in November last year. As a result, FTX suffered astronomical losses due to management’s embezzlement and breach of trust.
Additionally, the exchange has recently faced sanctions from financial authorities worldwide. The New York State Department of Financial Supervision ordered Paxos Trust, which issues BUSD, Binance’s stablecoin, to stop issuing coins. Reuters reported that Binance is under investigation by US judicial authorities on charges of illegal money laundering.
However, some in the financial market are critical of the domestic financial authorities’ attempt to regulate the leading exchange’s entry into the market. With Upbit of Dunamu monopolizing the virtual asset market, releasing “catfish” such as Binance is necessary to change the abnormal market structure.
Currently, according to the report, Upbit holds an 88% share of the domestic virtual asset market, with Bithumb and Coinone combined barely exceeding 10%. Korbit of Gopax, a small exchange, has a market share of less than 1%.