Background
South Korea is the world’s second-largest cryptocurrency market, yet it remains dominated by retail traders. Institutional participation is only now gaining momentum as regulations evolve. Local exchanges primarily offer spot trading, with little to no futures markets or comprehensive OTC options. HappyBlock – one of the first prime brokers to acquire a VASP license in South Korea – is stepping in to fill this gap, providing institutional clients with brokerage, custody, and OTC trading services.
THE PROBLEM
To serve the institutional gap, HappyBlock needed a robust and transparent price for settling and valuing cryptoassets in Korean won (KRW). However, calculating a price in the South Korean Markets is not straightforward because there’s often a disparity between South Korean market prices and the rest of the world, known as the “kimchi premium”.
The kimchi premium is caused by two key factors. First, strict capital controls imposed by Korean legislation makes it hard to move funds in and out of South Korea, resulting in a market that’s isolated from the rest of the world. Second, the lack of a futures market results in less arbitrage and, so weaker price discovery.
This premium makes it impossible to determine a fair market value for the South Korean market using existing dollar-based benchmarks from nearby markets such as Hong Kong, due to the price discrepancies.
To overcome these challenges and drive institutional adoption, HappyBlock needed a fair market value (FMV) solution that could deliver stable, anomaly-resistant prices that reflect the nuances of the South Korean market. In particular, the solution needed to accurately track USDT/KRW prices on Korean exchanges while still aligning with global best practices and standards.
The chosen solution would power several operational processes at HappyBlock:
Valuing assets under custody – Letting institutional clients know how much their assets under custody are worth, in-line with global FASB/IFRS standards.
Pricing OTC brokerage services – Pricing and settling large OTC crypto trades with KRW-demoninated prices that are accurate, independent, and reflective of the market.
Benchmarking OTC trades – Benchmark all OTC executed transactions, helping to prevent unfair trading practices and reinforce client confidence in execution prices.
Cross-operational valuations – Pricing consistently across both custody and OTC operations to meet audit requirements and avoid issues related to data manipulation or non-compliance.
Display pricing – Display a trusted price of BTC in KRW on happyblock.io, updated via api with minimal maintenance on a set cadence.
THE solution
After evaluating the market for institutional-grade solutions, HappyBlock selected Kaiko Fair Market Value as its FMV solution due to several key strengths:
Superior methodology
Kaiko Fair Market leverages a Robust Weighted Median (RWM), a method far more reliable than VWAP (Volume Weighted Average Price), which is commonly used in the Korean market. This means HappyBlock gets stable, anomaly-resistant prices, which is of particular importance in the more isolated, spot-only markets in South Korea.
Compliant pricing at scale
Kaiko Fair Market Value delivers accurate, independent pricing for thousands of crypto assets, quoted in KRW, meeting global FASB/IFRS accounting standards. By adhering to these global best practices, HappyBlock is now able to inspire confidence in its brokerage, custody, and OTC trading services with institutional clients.
Comprehensive market coverage
Kaiko Fair Market Value leverages real-time trading data from over 100 exchanges worldwide, including all major South Korean exchanges to compute prices, meaning HappyBlock can access prices that reflect both global and local market dynamics.
Local market coverage
Kaiko Fair Market Value allows customers to choose which exchanges to include in pricing calculations, meaning HappyBlock can choose to include Korean trades, ensuring an accurate representation of the Korean market.
Versatile delivery and history
Kaiko Fair Market Value is available as a real-time price feed, ideal for HappyBlocks website integration and live trading environments, and with full pricing history, HappyBlock can carry out retrospective analyses, such as benchmarking OTC transactions or performing end-of-day settlements. With Kaiko Fair Market Value, HappyBlock has established a transparent, reliable foundation for institutional crypto adoption in South Korea, delivering a compliant service, backed by robust pricing infrastructure that meets both local market nuances and global standards.
