[비즈한국] Cryptocurrency exchange Bithumb is pursuing an initial public offering (IPO) on the KOSDAQ market, targeting next April. In a prospectus disclosed on June 26, Bithumb stated, "We have selected Samsung Securities016360 as the lead underwriter and are currently conducting corporate due diligence." There have been concerns regarding Bithumb's IPO, ranging from questions about the opacity of its ownership structure to more recent legal risks.
The concerns regarding the opacity of Bithumb's governance are expected to be resolved soon. Currently, the major shareholders of Bithumb's parent company, Bithumb Holdings, include DAE (34.20%), Vidente121800 (30.00%), and Bthmb Holdings Pte. Ltd (10.69%).
Among these, Vidente has a somewhat complex ownership structure. The structure follows a chain of: "Kang Ji-yeon, CEO of Bucket Studio066410 → Initial → Initial No. 1 Investment Association → Bucket Studio → Inbiogen101140 → Vidente." Initial No. 1 Investment Association is currently pursuing the sale of Bucket Studio. Once the sale is complete, this complex ownership structure should be somewhat streamlined.
A Bithumb representative explained, "Since Lee Jung-hoon, the former chairman, acts as the actual owner, the governance structure is clearly defined. Vidente is just one of Bithumb's shareholders and does not exert significant influence."
However, a new variable has emerged recently in the form of legal risks. Financial authorities have recently launched an investigation into Bithumb. When Bithumb launched its Tether (USDT) market on September 22, it announced that it would "provide the largest liquidity in Korea by sharing liquidity with a top 10 global exchange (Australia's StellarX)." This means Bithumb is sharing order books with StellarX, where an order book refers to information regarding customer buy and sell orders.
Under the current 'Act on Reporting and Using Specified Financial Transaction Information' (Special Financial Transaction Act), for Bithumb to share order books with StellarX, it must submit documents such as the license issued by the Australian government for StellarX, as well as Bithumb's own customer identification procedures and methods, to the Korea Financial Intelligence Unit (KoFIU).
Financial authorities are investigating whether Bithumb violated these regulations. Recently, they even summoned and questioned Bithumb CEO Lee Jae-won. Rumors are circulating in the cryptocurrency industry that the authorities launched the investigation because Bithumb failed to report properly. Bizhankook reached out to Bithumb regarding this, but did not receive an official statement.
If a violation of regulations is confirmed, it could negatively impact the IPO process. Of course, a single regulatory violation does not necessarily disqualify a company from an IPO. However, if financial authorities impose sanctions, it could lead to disadvantages in future business operations, which might result in an unsuccessful IPO. This is because if Bithumb faces sanctions regarding its cryptocurrency trading business, it has no alternative source of revenue. Bithumb relies on cryptocurrency trading fees for the vast majority of its revenue. Out of its 329.2 billion won in revenue for the first half of this year, 323.5 billion won, or 98.29%, came from trading fees. For Bithumb, it is difficult to proceed with an IPO by setting the public offering price too low.
Conversely, some analysts suggest that as long as the matter does not lead to severe disciplinary actions such as a business suspension, it will not have a major impact on the IPO. Looking at the performance, Bithumb's revenue increased by 35.50% from 242.9 billion won in the first half of last year to 323.5 billion won in the first half of this year.
There is also significant anticipation for Bithumb’s long-term business diversification. Yang Hyun-kyung, an analyst at iM Securities, stated, "In the case of the US cryptocurrency exchange Coinbase, revenue is diversifying into areas such as trading profits, stablecoins, blockchain rewards, lending and interest, as well as ETFs and subscriptions. Ultimately, this diversification of business by crypto exchanges is expected to have a negative impact on traditional financial intermediaries like banks, securities firms, and asset management companies."
Ultimately, the disciplinary actions by financial authorities could have a significant impact on Bithumb's future management and its IPO. As Bithumb is attempting the first-ever IPO for a cryptocurrency exchange, the entire industry is watching closely. This is why all eyes are currently on the financial authorities' investigation into Bithumb.