South Korea's financial regulator publicly defended ownership limits on cryptocurrency exchanges Wednesday, signaling the government intends to proceed with controversial governance reforms despite opposition from exchange operators and the ruling party.
Financial Services Commission Chair Lee Eog-weon said licensed exchanges should face ownership caps of 15% to 20% for major shareholders.
The provision is expected in the Digital Asset Basic Act, which lawmakers aim to pass before the Lunar New Year holiday on February 17.
Lee's remarks represent the clearest regulatory backing yet for restrictions that would force founders at South Korea's largest platforms to divest significant stakes.
What Happened
Lee told reporters that exchanges should no longer be treated as ordinary private companies once they receive permanent authorization status under the proposed legislation.
The regulator plans to shift platforms from a three-year notification system to durable licensing that carries stricter governance requirements.
The ownership limit was outlined in policy documents submitted to the National Assembly earlier this month. Regulators argue concentrated ownership creates conflicts of interest and undermines market integrity at platforms that handle 11 million users.
Under current ownership structures, Dunamu Chair Song Chi-hyung and related parties control more than 28% of shares in the company that operates Upbit. Coinone founder Cha Myung-hoon holds approximately 53% of that exchange.
The proposed caps mirror rules applied to securities exchanges and alternative trading systems in traditional markets. Lawmakers and regulators remain in discussions over scope and timing for implementation.
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Why It Matters
The ownership restrictions threaten to reshape South Korea's cryptocurrency industry at platforms that processed $115 billion in capital flows last year. Exchange operators warn the forced divestments could disrupt ongoing consolidation, including Naver's planned merger with Dunamu.
The Digital Asset Basic Act would also establish minimum capital requirements of 5 billion won ($3.7 million) for stablecoin issuers, according to legislative proposals. Multiple bills introduced by Democratic Party lawmakers include provisions for 100% reserve backing and no-fault liability for operators.
Regulators describe the legislation as South Korea's second phase of cryptocurrency oversight. The first phase, implemented in 2023-2024, addressed market manipulation and user protection.
Disagreements between the Financial Services Commission and Bank of Korea over stablecoin governance have delayed the bill multiple times. The central bank advocates for bank-led consortiums holding 51% stakes in won-pegged stablecoins, while the FSC argues strict ownership rules could discourage fintech innovation.
Industry groups including the Digital Asset Exchange Alliance have opposed the ownership caps. The alliance, representing Upbit, Bithumb, Coinone, Korbit, and Gopax, warned that artificially changing private ownership structures would undermine domestic market development.
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