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- South Korea advances a 20% ownership cap to curb concentrated control in major exchanges.
- Upbit and Bithumb face major divestments as new governance limits reshape leadership.
- Industry pushes back, warning forced restructuring may destabilize Korea’s crypto sector.
South Korea is preparing a firm overhaul of ownership structures at major crypto exchanges as regulators press ahead with a new 20% shareholder cap. The move follows months of negotiations and signals a decisive shift in governance across the sector.
The ruling Democratic Party’s Digital Asset Task Force and the Financial Services Commission reached the final terms after prolonged debate, as per a report by Herald Economy. Their agreement is expected to be confirmed at a closed-door party-government meeting on March 5. Officials describe the cap as a central feature of the Digital Asset Basic Act’s second-phase legislation.
Regulators crafted a tiered framework to apply the limit based on exchange size. Upbit and Bithumb, which control most domestic trading volume, will face the restriction first. They will receive a three-year grace period starting once the law takes effect. Smaller platforms will receive a longer runway.
South Korea Targets Concentrated Stakes at Upbit and Bithumb
Furthermore, the parent company of Upbit, Dunamu, must restructure its ownership. Currently, the chairman, Song Chi-hyung, owns 25 to 28%. This is over the threshold, and he must divest several percentage points. This change is expected to be simple but significant.
Bithumb, on the other hand, must undergo an even greater change. Currently, Bithumb Holdings owns almost 73% of the exchange. However, this is not sustainable under the new regulations.
It must divest almost its entire holding. This change will likely impact the leadership of the platform.
Coinone, Korbit, and Gopax have been granted an additional three-year grace period. This is in addition to the regular grace period. This extension is granted because these platforms have fewer users. However, they must still face the 20% limit like the others.
Authorities argue the measure is necessary for fair oversight. The FSC has stated that a small group of founders and major shareholders currently holds excessive influence over operations.
Also Read: Crypto Crime Surge Triggers Record 1.3 Million Suspicious Transaction Reports
The commission warns that profits from fees concentrate in too few hands. Officials say this weakens accountability in a market that now serves millions.
Industry Pushback Intensifies Against Forced Ownership Cuts
Regulators label exchanges with over 11 million users as critical public infrastructure. Upbit and Bithumb qualify as such.
This categorization subjects them to similar regulations as alternative stock exchanges under existing capital markets laws. These regulations already restrict shareholdings through set limits and exceptions.
Industry groups are highly resistant to the proposal. The Digital Asset Exchange Alliance claims that the forced restructuring will be destabilizing.
The leaders of all major exchanges have also met in private sessions with ruling party lawmakers. The concerns raised included property rights and whether it is constitutional.
The government will still push through with the framework at its scheduled meeting on March 5. The lawmakers will then proceed with it in the National Assembly.
After its enactment, Korea’s largest exchanges will have to prepare for significant changes in ownership. The upcoming share sales could be some of the largest shareholding changes in Korea’s digital asset market.
Also Read: South Korea Cracks Down on Crypto Influencers With New Law
