- South Korea may cap crypto exchange ownership at 20%, hitting major players like Upbit and Bithumb directly.
- Lawmakers warn limits could slow innovation and raise market entry barriers despite aiming for fairer governance.
- Broader crypto rules expand background checks and require advisors to disclose conflicts of interest for transparency.
South Korea’s government and the ruling Democratic Party are considering a plan that could change the country’s crypto market significantly. The proposal would limit major shareholders in local crypto exchanges to owning just 20% of the company, though new businesses might be allowed up to 34%.
Discussions between the Democratic Party’s digital asset task force and the Financial Services Commission (FSC) indicate a growing concern over concentrated ownership and market influence. If enacted, exchanges would have three years to comply, with smaller platforms receiving an extra three-year grace period.
Currently, ownership among major platforms exceeds the proposed cap. Upbit chairman Song Chi-hyung holds 25.52% of the parent company, while Bithumb Holdings controls roughly 73.56% of Bithumb. Coinone chairman Cha Myung-hoon owns 53.44%, Mirae Asset Consulting is expected to hold 92.06% of Korbit, and Binance controls about 67.45% of GOPAX.
Upbit and Bithumb together dominate 90% of the country’s crypto trading market. Hence, the new limit would directly impact the most influential platforms, forcing major shareholders to reduce stakes through sales or restructuring.
Potential Challenges and Industry Concerns
However, the proposal remains at a discussion stage. It must pass through South Korea’s legislative process before becoming law. Some lawmakers, even within the ruling party, worry that ownership limits could weaken competition in a highly innovative tech sector.
An industry insider noted, “This is unprecedented worldwide and has low global consistency. If it is excessively introduced, it could have serious negative effects such as limited competition, slowed innovation, and strengthened barriers to entry.” Consequently, the industry debates whether the measures might protect users or hinder market growth.
Broader Regulatory Context
The ownership cap is only one measure of South Korea’s attempt to crack down on its crypto market. In January, for instance, the National Assembly revised its licensing criteria, and as a result, executives and large shareholders of crypto exchanges are subject to more detailed background checks. In effect, authorities can investigate serious offenses, for example, drug trafficking, tax evasion, and other serious financial offenses.
Furthermore, Democratic Party legislator Kim Seung-won plans to modify financial regulations, making it a requirement for financial advisors to disclose any conflict of interest when they advise clients on investing in crypto and other financial products.
South Korea is taking a tough stance on regulating digital assets. Through its ownership cap and other measures, it is ensuring that exchanges are run transparently and fairly, yet promoting digital assets’ growth.
