South Korea plans to limit crypto exchange ownership to 20%, affecting major players like Upbit and Bithumb, with new regulations on the horizon.
South Korean regulators have approved a plan to limit the ownership stakes of major shareholders in cryptocurrency exchanges to 20%. Exceptions may apply for new market entrants, allowing them to hold up to 34%, which aligns with the Commercial Code's requirement of 33.3% votes needed to block shareholder decisions.
If enacted, exchanges will have a three-year period to restructure their ownership to comply with the new regulations. This move significantly impacts leading exchanges such as Upbit and Bithumb, which dominate roughly 90% of the market. Smaller exchanges will benefit from an extended grace period of an additional three years.
Current Shareholding Landscape
The ownership structures of major exchanges currently exceed the proposed limits:
- Upbit's chairman, Song Chi-hyun, holds around 25.52%;
- Bithumb Holdings controls approximately 73.56% of Bithumb;
- Mirae Asset Consulting is expected to own about 92.06% of Korbit following a deal;
- Binance has a stake of about 67.45% in GOPAX.
Legislative Challenges Ahead
While the bill has received regulatory backing, it must still be introduced in the National Assembly by an unspecified member. The proposal may face opposition, particularly from some lawmakers, including those from the ruling party, who question the necessity for such stringent ownership limits.
Concerns have been raised about the potential negative impact on market competition. Local media warn that overly strict regulations could hinder innovation and create barriers to entry, stating,
“This is an unprecedented practice globally that contradicts international approaches. If regulation is too stringent, it will have serious consequences—limiting competition, slowing innovation, and creating high barriers to market entry.”
Regulatory Context
The National Assembly has already tightened regulations for Virtual Asset Service Providers (VASP) earlier this year, granting regulators broader investigative powers concerning executives and major shareholders for various violations, including economic crimes. Upcoming amendments to capital market and virtual asset laws will also require transparency from those providing investment advice or promoting trading in cryptocurrencies. It is important to note that South Korea lifted its ban on corporate investments in cryptocurrencies earlier this year.
