South Korea moves to cap crypto exchange shareholder stakes at 20%: Report

South Korea Proposes 20% Ownership Cap for Major Shareholders in Crypto Exchanges

South Korea's government and ruling party have reportedly agreed on a plan to limit the ownership stakes of major shareholders in domestic cryptocurrency exchanges to a maximum of 20%. This decision was reached by the Democratic Party of Korea's digital asset task force and the Financial Services Commission (FSC).

Ownership Thresholds and Grace Periods

Regulators may permit exceptions of up to 34% for new businesses through an enforcement decree, referencing the Commercial Act's 33.3% veto threshold for general shareholders' meetings. Exchanges would be granted three years from the law's enforcement to comply with the ownership structure changes, with smaller exchanges potentially receiving an additional three-year grace period. Major platforms like Upbit and Bithumb, which dominate the local market with approximately 90% share, must reduce major shareholder stakes within the initial three-year timeframe.

Current Ownership Levels Exceed Proposed Cap

Current ownership structures on South Korea's leading exchanges surpass the proposed 20% cap. For instance, Upbit chairman Song Chi-hyung holds about 25.52%, and Bithumb Holdings owns roughly 73.56% of Bithumb. Coinone chairman Cha Myung-hoon controls approximately 53.44%, Mirae Asset Consulting is set to hold around 92.06% of Korbit, and Binance owns about 67.45% of GOPAX.

Legislative Process and Industry Concerns

The ownership cap proposal faces a significant legislative process, with a National Assembly member expected to introduce the bill. Passage could be difficult, as some lawmakers have expressed reservations about restricting ownership in the sector. An industry insider cautioned that the measure could negatively impact competition, innovation, and market entry barriers, stating it is an unprecedented global approach.

Tightening Crypto Regulations in South Korea

This proposed ownership cap follows recent regulatory tightening in South Korea's crypto sector. In late January, the National Assembly approved stricter entry requirements for virtual asset service providers (VASPs), allowing authorities to scrutinize executives and major shareholders for a broader range of violations, including drug trafficking, tax evasion, and economic crimes. Additionally, in February, lawmaker Kim Seung-won announced plans to draft amendments requiring disclosure from individuals who provide investment advice or encourage trading of financial products or virtual assets.