The Financial Services Commission (FSC) of South Korea is advocating for a new ownership cap on major shareholders of cryptocurrency exchanges, proposing a limit of 15% to 20%. This comes as part of the regulatory framework under the forthcoming Digital Asset Basic Act. Current stakeholders such as Dunamu, the operator of Upbit, and Coinone are likely to face pressure to divest, as their existing shareholdings exceed the suggested limits.
This proposed legislation aims to establish a more structured and permanent authorization system for crypto exchanges, elevating their status to that of public infrastructure. Lee Eog-weon, the FSC Chairman, stated that the transition from private enterprises to entities with public responsibilities necessitates stricter governance rules. He emphasized that licensed exchanges will assume greater responsibilities akin to public institutions, which calls for enhanced governance frameworks.
Lee further illustrated the rationale behind these ownership restrictions, citing the need to prevent conflicts of interest and maintain market integrity. He noted that similar ownership caps exist for traditional securities exchanges, suggesting that it is reasonable to extend these measures to virtual asset platforms. The FSC”s current regulations primarily focus on anti-money laundering and investor protection, but the proposed changes signal a broader shift in regulatory oversight.
Despite the FSC”s intentions, leading crypto exchanges in South Korea have expressed strong opposition to the ownership cap proposal. The joint council representing key platforms including Upbit, Bithumb, and Coinone warns that such restrictions could stifle innovation and place Korean exchanges at a competitive disadvantage on the global stage.
If enacted, the new limits would require substantial changes at top exchanges. For instance, Dunamu currently has its chairman, Song Chi-hyung, and associated parties controlling over 28% of shares, while Coinone“s founder, Cha Myung-hoon, holds about 53%. Both would need to significantly reduce their stakes to comply with the proposed regulations.
Moreover, the ruling Democratic Party has raised concerns regarding the policy”s alignment with international standards. Party representatives have highlighted that similar ownership limitations are rare globally, which could lead to regulatory divergence. This adds a layer of political complexity as the government strives to reconcile innovation with necessary oversight.
Lee acknowledged ongoing discussions with the ruling party about the regulatory framework, asserting that while there is consensus on the need for the policy, debates continue regarding its implementation scope and timeline. The Digital Asset Basic Act represents a significant legislative effort, and the FSC plans to engage with the National Assembly and relevant ministries to facilitate its progress without unnecessary delays.
