Binance’s Potential Re-Entry into South Korea
In a positive turn of events for Binance, the South Korean Financial Intelligence Unit (FIU) has recommenced its assessment of the company’s prospective re-entry into the local market, particularly regarding its acquisition of the cryptocurrency exchange Gopax. Reports from local media on October 14 indicated that this review pertains to an executive change filing submitted by Gopax, which functions as an indirect evaluation of Binance’s status as a significant shareholder. If all goes well, regulatory approval could be granted as early as the end of 2025.
Regulatory Landscape
Currently, South Korean regulations lack a distinct legal framework for evaluating the qualifications of major shareholders in virtual asset exchanges. Instead, regulators rely on executive change reports to determine if key stakeholders meet the necessary standards.
Binance made its initial moves towards this acquisition by submitting the executive change report in March 2023, shortly after it secured a 67% stake in Gopax, thereby becoming its largest shareholder. However, the review faced delays as regulatory bodies expressed apprehension regarding potential risks posed by the exchange to South Korea’s anti-money laundering efforts, especially given Binance’s ongoing legal challenges in the United States.
Legal Challenges in the U.S.
In the U.S., the Securities and Exchange Commission, under former Chairman Gary Gensler, along with the Commodity Futures Trading Commission, accused Binance of marketing unregistered securities and lacking effective protections for customer assets. Alongside these allegations, the Department of Justice and the Treasury Department also pursued the exchange for breaches of anti-money laundering laws, culminating in a multi-billion dollar settlement in late 2023 and the resignation of founder Changpeng Zhao from his CEO position.
Supportive Regulatory Environment
With these issues now seemingly resolved, and amidst a supportive administration under President Lee Jae-myung, South Korean regulators have begun a more favorable approach to digital asset governance, contributing to the FIU’s renewed willingness to review Binance’s case.
Gopax Acquisition Context
Binance’s acquisition of Gopax came in response to a significant liquidity crisis faced by the exchange when its decentralized finance partner, Genesis Global Capital, froze customer assets tied up in the Gopax deposit product, GoFi, and subsequently filed for Chapter 11 bankruptcy in January 2023 due to its exposure to the FTX collapse. Millions of dollars belonging to customers were caught in this turmoil, prompting Binance to intervene with plans to infuse capital and facilitate the restoration of withdrawals, a move that not only aimed to aid the recovery of the industry but also to regain confidence in the South Korean market after its exit in 2021.
Gopax’s Unique Position
Gopax stands out as one of the few cryptocurrency exchanges within South Korea allowed to provide cash-to-crypto services, adhering to stringent local laws regarding due diligence for crypto activities. Thus far, no foreign exchange has successfully obtained this licensing, highlighting the competitive regulatory landscape in South Korea’s cryptocurrency sector.
