South Korea Plans 20% Cap on Crypto Exchange Shareholders

TLDR

• Korea plans 20% cap on major crypto exchange shareholders

• FSC may allow up to 34% stakes through enforcement decree

• Upbit and Bithumb exceed proposed ownership threshold

• Exchanges get three years to restructure holdings

South Korea is preparing to limit major shareholders in crypto exchanges to 20%. The proposal follows talks between the ruling party and regulators. Lawmakers aim to include the measure in the Digital Asset Basic Act.

The Democratic Party’s digital asset task force met with the Financial Services Commission to discuss the cap. According to local media reports, both sides agreed on a 20% threshold. The rule would apply to major shareholders in domestic crypto exchanges.

Regulators may allow limited exceptions of up to 34% through an enforcement decree. The threshold refers to the Commercial Act’s 33.3% veto benchmark at shareholder meetings. However, the general cap would remain at 20% for most cases.

Major Exchanges Face Ownership Restructuring

Leading exchanges exceed the proposed ownership limit. Upbit chairman Song Chi-hyung holds about 25.52%. Bithumb Holdings controls roughly 73.56% of Bithumb.

Coinone chairman Cha Myung-hoon holds around 53.44%. Korbit is set to be about 92.06% owned by Mirae Asset Consulting after an acquisition. GOPAX has about 67.45% owned by Binance.

Under the draft plan, exchanges would have three years to comply after the law takes effect. Smaller exchanges may receive an additional three-year grace period. Larger platforms such as Upbit and Bithumb must adjust within the initial three years.

The proposed cap could require divestments or ownership dilution. Lawmakers have not yet named a National Assembly sponsor for the bill. The legislative process may take time and face debate.

Lawmakers Cite Governance and Risk Concerns

The ownership limit follows regulatory concerns about concentrated control. Earlier this year, the FSC proposed measures to reduce governance risks. Officials linked concentrated stakes to oversight challenges in the sector.

A recent operational incident at Bithumb also drew attention. Reports said the exchange mistakenly transferred a large amount of bitcoin. The case raised questions about internal controls and risk management systems.

Industry representatives have expressed concern about the measure. The Digital Asset Exchange Alliance has warned that capping ownership could restrict growth. An unnamed industry insider said the proposal is “unprecedented worldwide” and could limit competition.

Broader Crypto Regulatory Tightening

The ownership cap forms part of wider crypto reforms in South Korea. In January, the National Assembly approved stricter licensing rules for virtual asset service providers. Authorities can now review executives and major shareholders for a broader range of violations.

In February, Democratic Party lawmaker Kim Seung-won announced plans to amend financial laws. The amendments would require disclosure from individuals promoting financial products or virtual assets. These changes aim to increase accountability in the digital asset market.

Lawmakers plan to include the ownership cap in the Digital Asset Basic Act. The framework will also address stablecoin issuance and crypto exchange-traded funds. The proposal now awaits formal introduction and further debate in the National Assembly.