KOSDAQ Delisting Risk for Bithumb Amid Financial Audit Dispute

03/31/2023 08:02 • Metaverse Matters • 98 views

On March 31, the market headquarters of KOSDAQ in South Korea announced today that due to the receipt of Vidente, the largest shareholder of Bithumb, the country’s crypto exchange, stating that it had rejected the audit opinion on the consolidated financial statements of the latest business year, there was a cause for delisting and it was facing delisting risks. The trading of Vidente shares will be suspended until the expiration of the delisting objection period or the date on which the objection decides to delist.

Vidente, the largest shareholder of Bithumb, faces delisting risk

As South Korea’s crypto sector battles a looming hostile regulatory policy, the nation’s Securities Market Options Exchange (KOSDAQ) threatens to delist Bithumb, the nation’s prominent crypto exchange.

Understanding the Threat of Delisting

On 31st March 2021, KOSDAQ, the nation’s securities exchange, revealed that Bithumb risked delisting because of a financial audit dispute. Vidente, Bithumb’s largest shareholder, refused to accept the audit opinion on the financial records of the latest business year. Consequently, the exchange was declared to face delisting risks.

What Caused the Delisting Risk

As the country’s finance officials scrutinize cryptocurrency platforms continuously, Vidente and Bithumb found themselves in a tussle to make their records compliant according to the guidelines by accounting standards. However, the firm-states had failed to agree on the accuracy of their accounts, pushing KOSDAQ to commence a rigorous review.
This dispute and KOSDAQ’s distrust of Bithumb’s records put the exchange under a significant risk of delisting. Bithumb, with an estimated worth of $1.7B, faces the peril of becoming the first crypto exchange to be delisted in South Korea.

Legal Objections

While KOSDAQ has indicated its intent to delist Bithumb, it also stated that trading in Vidente shares would be halted until the period of objection lapses, or the decision to delist is made. Vidente has 60 days to file an objection to the exchange’s decision once it receives a notification regarding the proposed delisting.
Should the exchange object to this decision, the exchange may appeal before the Securities and Futures Commission. This ruling is ultimate, and if KOSDAQ’s decision for delisting is confirmed, Bithumb will no longer exist as a public company.

Consequences of Delisting

KOSDAQ’s delisting decision would severely impact Bithumb as it would no longer be accessible to retail investors or retail traders. Its restricted public presence will prompt limited exposure to traditional investment media outlets or brokerage services.
This delisting, furthermore, would be another booby trap for South Korea’s beleaguered cryptocurrency sector, which currently faces the passage of the special financial law that mandates banks to conduct a thorough inspection of their crypto partners’ compliance practices.

FAQs

Q1: What is delisting, and what causes it?

Delisting is a process by which a company or a security offering is removed from an exchange. This occurs when the exchange has serious concerns about the financial reporting or compliance practices of a company.

Q2: What will happen if Bithumb is delisted?

If Bithumb is delisted, it will no longer exist as a public company. It will no longer have public exposure to investment media outlets, and retail investors will no longer be able to transact on the platform.

Q3: What is the impact of delisting on South Korea’s cryptocurrency sector?

Delisting Bithumb would represent just another obstacle for South Korea’s cryptocurrency sector, which is already facing significant regulatory hurdles. This could exacerbate the already tense environment for crypto exchanges and platforms in the country.

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