South Korea's ruling Democratic Party and the Financial Services Commission (FSC) have agreed to impose a 20% ownership cap on major shareholders of cryptocurrency exchanges. This measure, set to be included in the forthcoming Digital Asset Basic Act, aims to reduce governance risks associated with concentrated control and is part of a broader regulatory push that will also cover stablecoin issuance and cryptocurrency exchange-traded funds.
The FSC had initially proposed the cap earlier this year. While the base limit is set at 20%, the regulator may allow exceptions of up to 34% through enforcement decrees, providing some flexibility during implementation. A grace period structure is planned: once the legislation passes, major exchanges like Upbit and Bithumb will have three years to comply, while smaller exchanges will be given an additional three years.
The new rule could force significant restructuring for several major platforms. For instance, Bithumb's controlling shareholder currently holds over 73% of the exchange, and Binance owns more than 67% of Gopax—both figures far exceed the proposed 20% ceiling. Exchanges may need to dilute ownership or divest stakes to meet the requirements.
The proposal has faced opposition from the industry, notably from the Digital Asset Exchange Alliance, which represents South Korea's five largest crypto exchanges. The group warns that limiting major shareholder stakes could stifle industry growth and weaken a still-developing sector by forcing changes to private ownership structures.
Regulatory concerns were amplified by a recent incident where Bithumb accidentally transferred approximately $43 billion worth of bitcoin, highlighting internal control and risk management shortcomings. This event added urgency to calls for tighter exchange governance oversight.
Opposition lawmakers, specifically from the People Power Party, have raised alarms about potential unintended consequences. Party Leader Jang Dong-hyeok warned that the cap could trigger "reverse discrimination," putting domestic exchanges at a competitive disadvantage against global competitors that operate under different corporate structures. He argued that such restrictions could undermine responsible management, lead to an outflow of talent and capital, and hinder innovation among South Korean platforms.
This regulatory move continues South Korea's pattern of proactive crypto oversight, which has included the implementation of real-name trading, the Travel Rule, and enhanced investor protection measures since the 2017 boom.
