Korea’s Bold Crypto Exchange Ownership Cap: What It Means

The Financial Services Commission (FSC) of South Korea suggests 15-20% ownership rates on the large crypto-exchanges, including Upbit and Bithumb. The new Digital Asset Basic Act would mandate the huge shareholders to divest a portion of their interests.

The head of the financial regulator in South Korea revealed controversial plans on Wednesday. The FSC desires to limit the ownership of crypto exchanges.

FSC Chairman Lee Eog-weon defended the proposal during a media conference, arguing that expanding exchanges demand tighter governance.

Why Korea Wants Founder Control Slashed Now

The regulator is considering caps of between 15 and 20 percent. The proposal is supposed to be attached to the Digital Asset Basic Act, as reported by the Korea Times.

According to Lee, existing regulations only cover anti-money-laundering measures. The new bill will create comprehensive guidelines for the entire virtual-asset industry.

Shift from Notification to Authorization

Right now, exchanges work under a notification system that needs renewal every three years. The authorization system Lee described would be permanent and require more robust governance.

Licensed exchanges become quasi-public infrastructure, not just regular companies. Lee warned that too much ownership concentration leads to conflicts of interest and harms market integrity.

Securities exchanges already have ownership limits, Lee said. Virtual-asset platforms need the same standards.

Founders Must Sell Major Stakes

At Dunamu (Upbit’s operator), Chairman Song-hyung Chi owns over 28 percent. Coinone founder Cha Myung-hoon holds about 53 percent.

Both would need to sell big portions if the bill passes. The joint council of Upbit, Bithumb, and Coinone opposes it strongly.

The group says the cap would hurt Korea’s digital-asset industry badly. The ruling Democratic Party worries that foreign markets don’t have similar ownership limits, and Korea might fall behind.

Lee addressed these concerns but said discussions continue. There’s agreement that the policy is needed, though people debate the details and timeline.

What This Means for Big Exchanges

The FSC considers exchanges with over 1.7 million users as core infrastructure. Upbit, Bithumb, Coinone, and Korbit fit this category.

Regulators say founders have too much power already. Trading fee profits go to just a few people. The new review system targets this problem.

Industry reps call the limits property rights violations. Analysts warn forced sales could drop share prices. Finding buyers for large stakes won’t be easy either.

Merger in Jeopardy

The Upbit-Naver Financial merger (worth about 20 trillion won) faces new problems. Naver Pay was supposed to fully own Dunamu.

Bithumb Holdings owns 73% of the Bithumb exchange. They’d have to sell more than half a massive ownership shake-up.

Wider Regulatory Pressure

This FSC proposal came after stricter liability rules in December. Virtual-asset service providers will face bank-level compensation requirements.

South Korea keeps tightening crypto financial crime rules. New travel-rule requirements now apply to transactions under 1 million won ($680).

Still Under Discussion

The proposal isn’t final yet. Officials say the exact thresholds can change. Legal experts think a transition might take 5-10 years.

This is Korea’s biggest structural change since exchanges launched. The next few months will show if the reforms strengthen or disrupt the industry.

The framework might help financial institutions, though. Asset managers and securities firms could buy exchange stakes, speeding up institutional adoption.

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