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Korean companies’ exposure to digital assets grow

Report shows Dunamu, Kakao expand investment in virtual assets, others to follow to diversify portfolio, experts say

A growing number of South Korean companies are exposing themselves to cryptocurrencies, financial reports filed last year showed, as experts expect the trend to continue and gain traction.

At least 23 companies reported they were holding various types of cryptocurrencies as intangible assets as of the end of last year, according to financial reports filed with the Financial Supervisory Service, the country’s financial regulator.

Those with the most cryptocurrency was Dunamu, the operator of the country’s largest digital coin exchange Upbit, with a valuation of 46.2 billion won ($41.2 million) at the time the report was submitted. It also included 29.9 billion won of bitcoin and 159 million won in Ethereum.

Last year’s figures drew a notable change from the 11 billion-won worth of virtual assets the company reported just a year ago. Dunamu’s financial reports showed that the company added 742 bitcoins in 2020.

Mobile giant Kakao said it possessed unlisted and undisclosed types of digital coins worth 23.19 billion won, reporting its virtual assets for the first time in the company’s financial statement.

Kakao Investment, the venture capital unit of Kakao, had 17.6 billion won in cryptocurrencies and even made a profit of 390 million won by selling some of its holdings last year.

The country’s virtual currency exchanges also unveiled their cryptocurrency assets. The second-largest exchange Bithumb Korea said it owned 23.1 billion won in digital coins and Coinone, another exchange, declared it had 13.8 billion won.

These companies revealed their cryptocurrency holdings in accordance with K-IFS, the Korean version of International Financial Reporting Standards. K-IFS currently recommends cryptocurrency holdings, if significant to a company’s financial structure, be listed as intangible assets in their financial reports.

“If a company’s possession of cryptocurrency is not significant, they are not required to report their crypto holding,” said Kim Kook-hwan, a certified public accountant and also director of Global Business Consulting at Born2Global.

He added that it indicated there could be more companies sitting on the new type of digital assets since they would not be required to disclose the information.

Other companies that reported crypto holdings included Danal, a mobile payment solution provider, and Wemade, a game maker.

While it might not be surprising to see their interest in cryptocurrencies as they have also issued their own digital coins, nonfinancial companies running retail businesses also invested in cryptocurrencies last year.

A restaurant company called Sikui, which posted a revenue of 2.1 billion won, said it had 1 billion won in bitcoin and Ethereum in their assets as of end of December.

Local companies’ exposure to digital assets might continue this year as a growing number of domestic and overseas businesses aggressively move to acquire digital assets. Joining the latest bet on digital assets, Korean-Japanese game maker Nexon on April 28 announced it bought 1,717 bitcoins for $100 million.

US electric-car maker Tesla in February said the company purchased $1.5 billion in bitcoin, which is now valued about $2.48 billion, even after selling some of them and logging a net gain of $101 million from sales.

MicroStrategy, a Nasdaq-listed business intelligence company, began acquiring bitcoin since August 2020 and currently holds 91,579 bitcoins.

Kim and other industry experts said that this trend, backed by a growing acceptance from a broader audience and businesses, is here to prevail.

“I think companies do invest in cryptocurrencies but do so quietly and this trend will continue,” Kim added. “I’ve seen startups receiving cryptocurrencies instead of money for their services but their crypto exchanges or holdings were not apparent on paper,” Kim said.

Song In-Kyu, adjunct professor at Korea University’s Graduate School of Management of Technology, agreed with Kim.

“More and more companies will see cryptocurrency as a good opportunity to diversify their portfolio as well as to make some profits just as they do with financial products.

“Companies holding digital assets appear to be an inevitable trend,” Song said.

By Park Ga-young  (gypark@heraldcorp.com)
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