Global exchange Binance is allegedly closing talks with South Korean cloud service provider Megazone to lower its share in the local exchange Gopax drastically. With a 72.6% share right now, Binance intends to cut its ownership to as little as 10%, seeking to solve issues of governance brought up by financial authorities in South Korea.
Strategic Adjustment for Regulatory Compliance
Continuous legal difficulties influenced the decision to sell the majority of Gopax shares, bought in February 2023, to regain its position in the South Korean market after stopping activities in the nation in 2021.
However, South Korea’s regulatory authorities prohibited Binance’s capital infusion into Gopax, citing issues with the change in the main shareholder.
Recent American events, including legal challenges from the US Securities and Exchange Commission and regulatory concerns, have also added to the scrutiny South Korean officials face. Binance’s strategic change in Gopax’s ownership structure is, therefore, regarded as a reaction to fit local regulatory requirements.
Upcoming Contract Renewal Influences Decision
The timing of the sale coincides with the upcoming renewal of Gopax’s real-name account contract with Jeonbuk Bank, set to expire on August 11, 2024. This contract, initially signed in August 2022, is crucial for Gopax’s operations under South Korea’s stringent regulatory framework.
The anticipation of this renewal has added pressure on Binance to restructure its involvement with Gopax to ensure compliance and smooth business continuity.
Gopax has faced challenges since the collapse of FTX in November 2022, which led to halted withdrawals in its decentralized finance service featuring products from Genesis Global Capital. The subsequent bankruptcy of Genesis added to Gopax’s financial strain, with total debts reported at 118.4 billion South Korean won ($86 million) as of April 2024.
By negotiating with Megazone, Binance aims to improve governance and align with local regulations, ensuring the continued operation of Gopax in the South Korean market.
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