Korean crypto firms relocating for cheaper rent amid prolonged crypto winter
As the prolonged crypto winter continues to affect the industry, blockchain and cryptocurrency firms in South Korea are under pressure to economize. Faced with a deteriorating business and investment climate, numerous companies are reducing their office space and relocating to areas with cheaper rent, according to a Wednesday (local time) report by local media outlet Bizwatch.
Reducing operating costs
Bizwatch reported, citing industry sources, that Parameta (previously Iconloop), a blockchain enterprise, has relocated its headquarters from Seoul’s upscale Signature Towers to a more economical shared office space this year. This strategic move is interpreted as an effort to slash operating costs by choosing a location with significantly lower rental expenses. A Parameta representative confirmed that the relocation was part of measures to reduce costs.
Binance-backed Streami, which runs the Gopax cryptocurrency exchange, is also reportedly contemplating an office relocation after downsizing its staff. The company’s workforce has dwindled from over 100 employees earlier in the year to approximately 60 by September. A Streami spokesperson has indicated that they have yet to reach a decision regarding the relocation. Streami’s situation is particularly significant due to its ongoing challenges in securing approval from financial regulators for changes to its executive representatives since Binance acquired a majority stake. Recently, Streami appointed a new CEO from the domestic tech firm CityLabs, which has also purchased an 8.55% stake in Streami and intends to further increase its investment in the exchange operator.
Similarly, Korea Digital Exchange, the operator of cryptocurrency-only exchange Flybit, has listed for sale one of its two floors of office space in Seoul’s Seocho district. This move comes nearly a year and eight months after the company expanded into the current premises.
Changes in workforce sizes
Before the crypto winter, when the Korean crypto market witnessed unprecedented growth, numerous companies expanded their offices to make room for the growing workforce, bolstered by rising revenues. For instance, Dunamu, which runs Upbit — Korea’s largest crypto exchange — garnered attention for acquiring pricey real estate in Gangnam to construct a new office.
However, the boom was short-lived. With the onset of the crypto downturn, numerous companies found themselves having to shut down. Blockchain technology firms are facing similar challenges, with many developers steering away from the sector due to persisting market instability. For many of these firms, the workforce has diminished as they’ve either undergone restructuring or struggled to recruit replacements for departing employees.
An industry insider remarked that reducing operating costs is a logical step for companies facing a lack of investment and revenue. They noted that this only applies to those resilient enough to weather the hardship, adding that many cryptocurrency-only exchanges are likely to shut down completely in these challenging conditions.
In fact, Cashierest, a crypto-only exchange, recently announced the cease of operations. Concerns about the company had been growing after staff layoffs and the departure of its CEO in July. A thorough analysis by the Financial Intelligence Unit (FIU) of the Financial Services Commission (FSC) found that, of the 21 Korean crypto-only exchanges, 18 are operating with negative shareholder equity as of the first half of this year. Moreover, 10 did not earn any revenue from transaction fees during the same period.
Crypto-only exchanges typically see lower trading volumes as they cannot facilitate trades in Korean won. In South Korea, only five trading platforms — Upbit, Bithumb, Coinone, Korbit and Gopax — are officially registered with the financial regulator to conduct fiat-to-crypto transactions.
