TLDR:
- FSC proposes 15-20% ownership cap on crypto exchange major shareholders under Digital Asset Basic Act framework.
- Upbit operator Dunamu and Coinone would face forced divestment as current stakes exceed proposed limits.
- New authorization system would grant exchanges permanent status, elevating them to public infrastructure level.
- Ruling Democratic Party raises concerns that ownership caps are uncommon internationally, creating divergence.
Financial Services Commission Chairman Lee Eog-weon has doubled down on plans to limit major shareholder stakes in cryptocurrency exchanges, despite opposition from industry operators and the ruling Democratic Party.
The regulator argues ownership restrictions are necessary as exchanges transition from private enterprises to entities with broader public responsibilities under proposed comprehensive digital asset legislation.
Regulatory Shift From Notification to Authorization System
The South Korean financial regulator is considering caps between 15 and 20 percent on controlling shareholder stakes in virtual asset exchanges according to The Korea Times.
This provision is expected to feature prominently in the Digital Asset Basic Act, representing the second phase of the country’s cryptocurrency legislation.
Lee explained that current regulations primarily address anti-money laundering requirements and investor protection through existing frameworks.
The proposed legislation marks a fundamental change in how exchanges operate within the regulatory landscape. “Under the current system, virtual asset exchanges operate under a notification system that requires renewal every three years,” Lee stated during a media conference.
The new authorization framework would grant exchanges permanent operating status, elevating their position within the financial ecosystem. “This higher status means exchanges need governance rules that match their larger role and greater responsibilities,” he added.
Lee emphasized that licensed exchanges would no longer be treated simply as private businesses. “Once licensed, exchanges would no longer be treated simply as private enterprises but would assume characteristics akin to public infrastructure,” he explained.
This transformation necessitates governance mechanisms that align with their expanded role and responsibilities.
The chairman drew parallels with existing financial market structures to justify the proposed measures. “Excessive concentration of ownership could increase the risk of conflicts of interest and undermine market integrity,” Lee warned.
“Securities exchanges and alternative trading systems are already subject to ownership limits, making it reasonable to apply similar standards to virtual asset platforms,” he noted.
Industry Opposition and Enforcement Challenges
Major domestic exchanges have voiced strong opposition following reports about the ownership cap proposal. The joint council representing platforms including Upbit, Bithumb and Coinone warned the restrictions could hamper development of Korea’s digital asset sector.
Industry stakeholders argue the measures may place Korean operators at a competitive disadvantage compared to international counterparts.
The proposed limits would force substantial changes at leading exchanges if enacted as currently outlined. At Dunamu, which operates Upbit, Chair Song Chi-hyung and associated parties control more than 28 percent of company shares.
Coinone founder Cha Myung-hoon holds approximately 53 percent of his platform, meaning both would need to divest significant portions under the proposed framework.
The ruling Democratic Party has raised concerns about the policy’s alignment with international regulatory approaches.
Party representatives noted that similar ownership restrictions remain uncommon in other jurisdictions, potentially creating regulatory divergence.
This position adds political complexity to the legislative process as the government seeks to balance innovation with oversight.
Lee acknowledged ongoing discussions with the ruling party while maintaining the policy’s fundamental necessity. “While there is broad agreement on the policy’s necessity, discussions are ongoing over its scope and timing,” he confirmed.
“The Digital Asset Basic Act is a major legislative undertaking,” Lee stated. “Consultations with the National Assembly and relevant ministries will continue to ensure the bill moves forward without unnecessary delays,” he added.
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