South Korea shuts down crypto treasury shortcut for listed firms

The Korea Exchange (KRX) announced on July 2nd that the KOSDAQ listing rules have been changed so that public companies cannot covertly change their original technology businesses to investing in cryptocurrencies. This rule, which restricts one of Asia’s largest equity markets and sends a clear message to the growing trend in companies around the world to invest in Bitcoin or any other form of cryptocurrency as part of their cash treasury strategy, is being put into place by the KRX to stop companies from making these kinds of business changes without any warning or oversight from their investors. The new rules state that when a company has entered the KOSDAQ through the technology special listing program, and it switches its main business within 5 years from the IPO date, they are now going to be subject to a formal review process for delisting as a result of the business change, which was announced by the KRX on July 2. The amendments became effective on July 2, and any crypto-oriented business changes made will now be included under the exchange’s rules for substantive listing reviews from that date forward. KOSDAQ tightens tech listings KRX representatives cited one example: a biotechnology company that utilized the tech-exception procedure to become publicly listed transferred control of its business to an overseas digital asset business and became a crypto investment vehicle. The KRX announced that when this company made its pivot, it undermined the rationale for listing when it was initially approved. In other words, the KRX concluded that this company had been approved for listing on the basis of a technology characterization and growth outlook as a biotechnology business and that it could no longer depend on those characterizations and expectations for approval based on its current business strategy, because it was now a cryptocurrency investment vehicle. The tech-exception process was introduced in 2015 to allow firms with strong technology characteristics but limited revenue to access the capital markets. Many successful examples of both KOSDAQ and KRX-listed companies are Alteogen and Rainbow Robotics, which are currently among the largest companies in KOSDAQ measured by market capitalization. The process allows companies that have passed an evaluation of their technology by authorized evaluation organizations to access the capital markets without meeting the conventional profitability requirements. These companies are provided with a three- to five-year grace period from specific delisting requirements while they invest in commercialization of their technology. Earlier, Cryptopolitan reported that South Korea’s FSC is targeting ‘kimchi coins’ crypto whales in a price manipulation inquiry. Recent data provided by the Financial Supervisory Service (FSS)indicates that 88.6% of the KOSDAQ 105 companies that qualified for their IPO pricing based on a projection through 2022 to 2024 used the tech-exception process.