Crypto exchange Binance to work with Busan on blockchain

Binance, the world’s largest cryptocurrency exchange by trading volume, announced on Friday it had signed a memorandum of understanding (MOU) with South Korea’s second-largest city of Busan. 

The agreement states that Binance will provide Busan with technological and infrastructure support to develop the city's blockchain ecosystem, as well as to promote the Busan Digital Asset Exchange.

The Busan exchange focuses on enabling the trading of cryptocurrency, security token offerings (STOs), and non-fungible tokens (NFTs). 

Those familiar with the agreement told The Korea Economic Daily that the Cayman Islands-based exchange approached Busan's city government directly to bypass the central government's restrictions on the company’s operations in Korea. 

Binance said it plans to re-open its Korea office in Busan before the year's end.

The exchange, founded by Changpeng Zhao, also known as CZ, will use Busan's blockchain regulatory-free zone to promote blockchain initiatives and businesses and provide specialized blockchain education and online resources through its Binance Academy.

To date, Korea’s largest crypto exchange is Upbit with 2.6 trillion won ($1.95 billion) in trading volume. The figure for Binance hovers around $50.2 billion. 

The city of Busan has been preparing for a digital asset exchange since last year and established a blockchain association in cooperation with Shinhan Bank Co., Busan Bank, and Mirae Asset Securities Co.

The city government is slated to launch the exchange in the second half of 2023.

The Korean government had earlier thwarted an attempt by Binance to enter the country, citing money laundering concerns.

Binance established a local office, dubbed Binance KR, in May 2019 and began trading services the following April. 

But the company folded its Korea operations after just eight months, citing tight liquidity and low transaction volume. 

Industry insiders said, however, the main reason was that the government banned the practice of order book-sharing within the global Binance ecosystem, which could set the stage for cross-border money laundering.

Moreover, the Financial Services Commission requires that a real-name registration system be implemented for cryptocurrency trading.

Authorities are concerned that getting accurate information about the accounts with real names would be difficult with companies not registered within the local system.

Write to Jin-Woo Park at jwp@hankyung.com
Jee Abbey Lee edited this article.