Binance Set to Secure South Korean Footing with Long-Delayed GoPax Approval

In the beginning of 2023, Binance became the majority shareholder of GoPax, taking over about 67 percent of its shares. Soon after that, the company submitted a formal request to the South Korean Financial Intelligence Unit (FIU) for the changes in the GoPax management since the domestic crypto regulatory frameworks require such changes to be reported. Nevertheless, that request has been pending for more than two years. The FIU has just renewed its review of pending executive changes, as local media outlet Newsis reported. People watching the situation interpret this as a sign that regulators have now taken a different view of Binance and consider it less risky than previously.

While the decision was pending, regulators assessed whether Binance’s planned control of GoPax met existing compliance and reporting standards. Crypto operators in South Korea are required to provide the FIU with information about their corporate leadership. Still, at present, there is no separate law governing the eligibility of a crypto exchange’s ultimate parent company to have control over local operations.

A major element that influenced the change of South Korea was the situation in the United States. Binance has been subjected to various regulatory actions such as a series of lawsuits by the U.S. Securities and Exchange Commission (SEC). Nevertheless, over the past several months, these matters have been progressing toward a conclusion: the SEC has withdrawn its lawsuit against Binance’s founder Changpeng Zhao (CZ), and previously initiated cases, it is said, have been resolved through the payment of fines. These steps are seen by industry analysts as a reduction of the risk that Binance could be a source of instability in other jurisdictions.

An industry insider told Newsis that although the executive filings are rather routine from a formal point of view, regulators have examined them with such scrutiny as they would when looking at major shareholders of traditional financial firms. The insider also implied that the South Korean FIU might be more inclined to give the green light now that U.S. pressures have been lifted.

If given the green light, Binance would be allowed to operate without any ambiguity concerning the management and control of GoPax. In that way, the GoPax platform, risk systems, and liquidity operations could be better coordinated with Binance’s global infrastructure. Some local stakeholders see the consolidation as a potential that might make GoPax more competitive, especially at the intersections of cross-exchange settlement, market access, and compliance systems.

The opposite camp, however, warns the regulatory approval should not be taken for granted. They insist that surveillance should come with provisions that guarantee robust compliance standards, auditability, transparency, and continuous regulatory reporting. The remaining issues revolve around capital flows across borders, data security, and the possibility of regulatory arbitrage.

Presently, with regulators being actively engaged in their review of the filings, there is a broad industry consensus that the final approval will come before the end of the year. Regardless, the FIU’s decision-making is not entirely visible, and its timetable may be extended in case of further questions or conditions. In the event of approval, it might be considered as one of the most monumental changes in South Korea’s crypto scene, which could lead to Binance having a more direct influence on local operations. On the other hand, it indicates that regulators could be easing their stance towards global crypto firms which were previously at odds with them, provided that such firms comply with the regulations.

The situation between Binance and GoPax might create waves that extend beyond Korea. Authorities in other markets that are watching this transaction might feel the necessity to provide more explicit guidance concerning parent-company eligibility and cross-border supervision of crypto groups. In addition, the successful conclusion of Binance in obtaining local approvals after enduring scrutiny for several years might serve as a motivation for similar moves in the markets where it plans to expand. Nevertheless, the deal also highlights the existence of a tension between the need to balance innovation and market growth against the necessity of sufficient regulatory oversight to prevent financial crime or systemic risks. The South Korean case may be an indicator of the scale of that balance.