South Korea Proposes 15-20% Ownership Caps for Major Crypto Exchanges

TLDR:

• FSC designates exchanges with 11 million users as core infrastructure requiring stricter oversight.
• Dunamu’s Chairman Song must divest up to 10% of his 25% stake to comply with proposed regulations.
• Bithumb Holdings faces major restructuring with current 73% ownership far exceeding proposed caps.
• Industry critics warn regulations could infringe property rights while destabilizing management control.

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South Korea’s Financial Services Commission has proposed sweeping ownership restrictions for the nation’s largest crypto exchanges. 

The regulatory framework targets platforms serving approximately 11 million users, including Upbit, Bithumb, Coinone, and Korbit. 

Under the proposal, major shareholders would face ownership caps between 15 and 20 percent, forcing significant stake reductions across the industry.

Regulatory Framework Targets Major Exchange Operators

The FSC’s Digital Asset Framework Act designates high-volume exchanges as core infrastructure for virtual asset distribution. 

This classification brings these platforms under stricter governance standards comparable to alternative trading systems under the Capital Markets Act. 

The commission identified concentration of control among founding shareholders as a primary concern requiring intervention.

Current regulations for alternative exchanges already limit voting share ownership to 15 percent, including special related parties. 

Exceptions allowing up to 30 percent require explicit approval from public funds or the FSC itself. The proposed measures would apply similar standards to cryptocurrency platforms, fundamentally altering their ownership structures.

The FSC stated “there is an issue of a small number of founders and shareholders exerting excessive control over the overall operation of the exchange.” Officials noted “there are voices calling for the improvement of the ownership structure, in which huge operating profits such as fees are concentrated on specific individuals.” 

The commission views dispersed ownership as essential for maintaining fair market operations and protecting consumer interests.

Leading Exchanges Face Mandatory Stake Reductions

Dunamu, the operator of South Korea’s largest exchange Upbit, would experience notable changes under the new framework. 

Chairman Song Chi-hyung currently maintains approximately 25 percent ownership of the company. Implementation of the proposed caps would require Song to divest up to 10 percent of his holdings.

The timing proves particularly complex as Dunamu pursues a merger with Naver Financial through a comprehensive stock exchange. 

This regulatory shift could substantially affect the merger negotiations and final structure. Market observers note the proposal adds uncertainty to one of the industry’s most anticipated corporate developments.

Bithumb Holdings faces even more dramatic adjustments given its 73 percent stake in Bithumb exchange. The company would need to sell a substantial portion of shares to comply with regulations. 

Such a large-scale divestment could fundamentally reshape the exchange’s governance and decision-making processes.

Industry Voices Concerns Over Regulatory Approach

Coinone presents another case requiring major restructuring under the proposed ownership standards. Chairman Cha Myung-hoon holds 54 percent of the company, far exceeding the suggested caps. 

Meeting compliance would necessitate disposing of more than 34 percent, potentially jeopardizing management control entirely.

Virtual asset industry representatives have criticized the government’s approach as exceeding reasonable market guidelines.

Industry sources stated “the government is trying to impose excessive regulations beyond market guidelines.” Some stakeholders question whether such strict ownership requirements serve the intended purpose of consumer protection.

Critics warn “the second-stage legislation being promoted to promote the virtual asset business and protect consumers may lead to infringement of individual property rights as well as shaking management rights.” 

The industry maintains that second-stage virtual asset bills should promote business growth rather than impose restrictive measures. Debate continues as the FSC advances the regulatory framework through legislative channels.

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