Being the undisputed world leader in its sector of activity does not protect you from a setback in your policy of expansion. The Binance group has just done the bitter experience with its South Korean subsidiary Binance KR. It is indeed obliged to close its doors after recording figures which are at least disappointing. Launched only eight months ago, the subsidiary has failed to obtain the necessary liquidity to continue offering its services. A failure from which Binance should learn lessons for the future as signaled by its leaders.
A departure caused by low use and limited volume of BKRW pairs
It was through a press release that Binance announced the closure of its South Korean branch, whose deposit operations ended on December 24. It justifies this decision-making by low usage and limited volume of BKRW pairs which implies limited liquidity for its users. Consequently, the customers of the subsidiary with the assets will be able to trade them on Liquid Swap and earn commissions in liquidity pools until January 29, 2021. This period also includes exchanges with assets like USDT, BTC, BUSD, XRP, ETH, BNB, AAVE, DOT, ADA, and LINK on the fiat spot market of BKRW.
The Binance KR team intends to use this situation as an inspiration to reassess its market strategy. This should be done based on the resources and experience gained in operating a local exchange. For his part, Changpeng Zhao -the CEO of Binance- said, “As we continually create new businesses and develop platforms with local partners to increase access to cryptocurrency around the world, we will continue to look for ways to improve and provide the best service to users, including our KR community “.
South Korean exchanges facing low transaction volume issues
Besides Binance KR, another local cryptoexchange, namely Bit price, had to suspend its activities for the same reasons in August 2019. In general, the low transaction volumes are a problem facing all of the country’s structures working in the sector. A report of Business Korea draws up a frightening assessment to this effect by revealing that 97% of these exchanges were at risk of bankruptcy.
To this must be added the rigid regulatory climate that prevails in the country with the multiple restrictions set by the Financial Services Commission (FSC). This has in particular outlaw the use of privacy-friendly tokens like Monero, Dash and Zcash in exchanges. A decision which therefore further lowers the transaction volumes which were already low.
While Binance has suffered a significant setback with the closure of its South Korean subsidiary, the group has not lost its flair for good deals. He has just signed a partnership with Chiliz for the farming of these tokens on Launchpool