Bithumb Restructures to Prioritize Core Exchange Operations, Eyes IPO

Strategic Business Separation and Organizational Overhaul

Bithumb, South Korea’s foremost cryptocurrency exchange, has announced a comprehensive restructuring aimed at strengthening its core exchange operations. The decision, which involves separating its main exchange functions from ancillary business ventures through a spin-off, comes as part of a broader preparation for a potential IPO on the KOSDAQ exchange. This transformation also consolidates governance under former chairman Lee Jung-hoon, signaling a significant leadership change.

On July 25, Bithumb revealed through the Financial Supervisory Service’s electronic disclosure system that the spin-off process is now in progress. The company has scheduled an extraordinary shareholders' meeting for August 11 to finalize the spin-off proposal, with completion targeted for August 15. Samsung Securities will act as the lead advisor, underscoring the spin-off's role in highlighting the profitability and stability of Bithumb’s core exchange business, a key step towards its IPO ambitions.

Previously engaged in diverse sectors such as real estate, stock investment, and management consulting, Bithumb’s primary exchange business often faced overshadowing by the inconsistent performance of these ventures. The restructuring aims to provide a clearer assessment of the core business's performance.

"The diverse nature of our current business structure has camouflaged the profitability and growth potential of our core exchange operations," Bithumb stated. "The spin-off enables a more focused evaluation of our key business segments.”

Post-spin-off, the existing “Bithumb Corporation” will continue managing the cryptocurrency exchange, overseeing customer deposits totaling KRW 2.3 trillion and maintaining a reserve fund of KRW 100 billion. Concurrently, a new entity, “Bithumb A,” will emerge as a holding company for ventures like Web3 platform development, direct investments, and strategic partnerships, controlling assets worth KRW 620 billion, including cash reserves exceeding KRW 280 billion.

A company official added, “The reorganization allows Bithumb A to operate independently, enabling a more dynamic and proactive approach toward new business expansion."

Governance Overhaul: Lee Jung-hoon Consolidates Control

Bithumb has addressed longstanding governance issues that had impeded its listing and acquisition potential. On July 13, Bithumb Holdings, the parent company of Bithumb, announced that its largest shareholder changed from Vidente to DAA. This shift, facilitated by a call option exercise, gives DAA a 34.2% stake, reducing Vidente to a general shareholder.

This change represents more than a transfer of ownership; it consolidates governance under Lee Jung-hoon, former chairman of Bithumb Holdings and Bithumb Korea. Currently, Bithumb’s largest shareholder is its parent company, Bithumb Holdings, which owns 73.56% of the exchange. The principal stakeholders in Bithumb Holdings are DAA (29.98%), BTHMB Holdings (10.70%), and Lee Jung-hoon (4.46%). Although Vidente retains a 30% stake in Bithumb Holdings, its previously dominant position has shifted.

The governance restructuring clarifies Lee’s indirect control over Bithumb through a network of offshore entities. Central to this structure is SG Brain, a Singapore-registered entity owning 95.8% of BTHMB Holdings, which in turn fully owns DAA. This chain of control ultimately leads to Bithumb Holdings.

As the principal owner of SG Brain, Lee Jung-hoon exerts substantial influence over Bithumb through this intricate structure. Past disputes between Vidente and Lee over Bithumb’s control underscore the significance of this governance consolidation under Lee’s leadership.

"Following the South Korean Fair Trade Commission’s designation of Bithumb as a public disclosure target group in May,” a Bithumb spokesperson noted, “the agency formally recognized Lee Jung-hoon as the company’s identical person (total owner), clarifying his role in the governance structure.”

The spokesperson added, “We believe this designation will mitigate doubts surrounding our ownership structure.”

Transparency Challenges Amid Global Governance Complexities

Despite the governance restructuring, Bithumb faces challenges in its IPO journey, particularly concerning its global governance framework. Key governance entities like the Singapore-based DAA and BTHMB Holdings fall outside South Korean regulatory oversight, limiting domestic control and posing potential risks.

In response, Bithumb reaffirmed its commitment to transparency and robust corporate governance. "We have long separated ownership and management to establish a framework for independent, professional management,” the company stated. “Decisions on major business matters are made through independent processes, and as a Virtual Asset Service Provider (VASP), we continue working to comply with all regulatory requirements in the crypto industry."

As Bithumb moves towards its potential IPO, addressing these transparency issues, especially regarding its international governance structure, will be crucial for its market success.