Mirae Asset wins Korea’s approval to buy Korbit in a TradFi-crypto first

On July 9, the Fair Trade Commission of South Korea (KFTC) approved Mirae Asset Consulting’s acquisition of 92.06% of the cryptocurrency exchange Korbit. This is the first time that a subsidiary of a significant Korean financial institution has been permitted to buy a licensed digital asset exchange.

For the rest of the world, which is keenly observing how conventional finance is moving towards cryptocurrency, this ruling represents a real trial for the acceptance of that merger.

Regulators in the US, Europe and Asia spent years considering how banks and asset management companies would be able to operate exchanges. South Korea has demonstrated one approach to make use of and did not have to break down the barriers between finance and cryptocurrency.

Mirae Asset Consulting is paying 133.4 billion won for the acquisition (equivalent to $97.9 million based on Bank of Korea’s exchange rates on July 9). The company purchased 26.9 million shares of Korbit, as stated in the regulatory filing.

Why the regulator said yes

The KFTC based its case for approval on the fact that Korbit is a minor player in the market. The commission informed that Korbit is the fourth in the country of five licensed exchanges operating using the technology of exchange trading with won. The platform saw the trading volume of the year equal to only 0.5%. Also, it is widely known that Upbit accounts for 69% of trading volume; Bithumb reaches about 28%; Coinone has about 2%; and Gopax is close to 0.1%, as reported by Bloomingbit.

Thus, the Commission ruled that the deal will not cause harmful effects on the market. The commission explained that it studied two risks: whether it is possible to create a stock-and-crypto platform that will make difficult for competitors to access the securities market and whether it is realistic to set up a crypto-exchange traded fund that will push rivals in asset management. The regulator concluded that these risks could occur only in the case of Korbit enjoying much more liquidity.

“For concerns such as the exclusion of competing businesses in the securities and asset management markets to actually materialize, Korbit must have sufficient liquidity,” a commission official said, according to Chosunbiz, adding that “at the current level, it is insufficient to cause anticompetitive effects.”

A workaround, not a rewrite

In Korea, there is a regulation that prohibits banks, insurance companies, and securities firms that are regulated from participating in cryptocurrency transactions, which was the approach that Mirae Asset applied in executing this transaction.

The buyer is a firm called Mirae Asset Consulting, which is an organization not in the financial sector that generates its revenue from hotel operations, and not from any of the various activities related to investment securities or other financial activities conducted by the group.

Structure is important to anybody viewing the deal as a precedent. Mirae Asset didn’t manage to secure the approval of its financial subsidiary to own the exchange but employed a non-financial company to hold the asset to assure that the separation principle was preserved, which is a difference highlighted by KFTC when it called this precedent the first case of a financial entity subsidiary acquiring a digital asset exchange.

According to a report from Ledger Insights, the sellers are NXC, which is the holding firm of game maker Nexon, and SK Square. Meanwhile, it looks like Bitstamp, which is owned by Robinhood, retains the other 8 percent stake in Korbit. This stake is in line with Mirae Asset Group’s goal of building digital asset and wallet infrastructure outside of Korea.

What it signals for the wider market

The purchase slots into a strategy Mirae Asset has branded as “Mirae Asset 3.0,” a plan its securities arm announced this year to fold digital assets into a traditional finance business. The ownership of the exchange infrastructure gives the company a licensed base from where to explore the world of tokenized securities and crypto ETFs.

KFTC defined the outcome as a stimulus, rather than a threat to the industry. “We hope competition in the digital asset market will be invigorated through a reshaping of the digital finance market and service innovation,” it said, according to DigitalToday.

Only time will tell if the reshaping of the market will remain confined to Korea. The consolidation process has already begun since Coinone is currently seeking for a buyer, according to a CoinMarketCap report. A licensed exchange now located among one of the biggest banking conglomerates in South Korea acts like a new indicator for international financial institutions that are still contemplating how to invest in cryptocurrencies through legal means.