Coinone, South Korea's third largest cryptocurrency exchange, has denied reports of negotiations to sell a stake to Coinbase, which silences speculation that the American exchange giant is seeking to re-enter the liquidity-rich Korean market.
The denial highlights how challenging it is for international exchanges to still penetrate South Korea's tightly regulated crypto markets, even as domestic players undergo rapid consolidation.
Completely unfounded
The cancellation occurred after the Seoul Economic Daily reported on January 25 that Coinone's chairman Cha Myung-hoon is exploring a partial sale of ownership, and Coinbase was mentioned as a potential buyer. The report also noted that Coinbase executives are coming to Korea this week to meet key local players, including Coinone.
"The rumors circulating about the sale of shares are completely unfounded," a representative of Coinone told local media. "It is true that we have received various cooperation proposals from foreign exchanges and domestic companies, but we are only in contact with several parties while evaluating opportunities for business expansion. Interpreting these as a share sale does not reflect the truth."
The company added that it is open to cooperation with foreign exchanges and domestic companies, but there are currently no concrete plans or negotiations underway.
Market reaction
Despite the controversy, the markets reacted sharply to the initial information. Com2uS Holdings, which is Coinone's second largest shareholder with a 38.42 percent stake, saw its stock price rise by over 17 percent on Mondays. The stock peaked at 26,300 won before closing at 23,850 won.
The swift response indicates a broad market awareness. Korean cryptocurrency exchanges have become attractive acquisition targets amid a strong wave of mergers in the industry.
Regulatory pressures are increasing
Share sale speculation is particularly timely considering Korea's changing regulatory environment. The Financial Services Commission (FSC) has recommended restricting share ownership to 15-20 percent as part of the country's second phase of virtual asset legislation, concerned about the concentration of ownership among exchanges as there are 11 million users.
Chairman Cha currently owns 53.44 percent of Coinone through his own holdings (19.14%) and his holding company The One Group (34.30%). If such regulation were to come into effect, he would need to significantly reduce his ownership, regardless of any potential Coinbase collaboration.
However, the ruling Democratic Party decided on January 20 to remove the ownership restriction from the current legislative project, although analysts note that the measure may resurface if market concentration or security concerns intensify.
Consolidation wave
Coinone's speculation is happening while the Korean cryptocurrency exchange industry is experiencing unprecedented structural changes. Naver Financial and Dunamu, the operator of market leader Upbit, have agreed to a merger through a large stock exchange. Mirae Asset Securities aims to acquire the fourth largest Korbit. Binance recently received final regulatory approval for the acquisition of the fifth largest Gopax.
Korea's cryptocurrency markets remain highly concentrated, with Upbit and Bithumb together controlling over 97 percent of the market share according to official data. Coinone lags behind with about 1.5 percent market share officially, but private estimates from CoinGecko suggest that the market share may have risen to around 6.6 percent in January.
For Coinbase, which has regarded the Korean market as one of the world's most active trading areas for private investors, a local partnership would provide regulatory compliance and a ready-made infrastructure. However, Coinone's clear stance suggests that such an arrangement is unlikely at least at this moment.