South Korean authorities settle on 20% ownership cap for crypto exchanges: report

South Korean regulators and legislators have agreed to cap major shareholder stakes in cryptocurrency exchanges at 20%, despite strong industry pushback.

According to a report from the Korea Herald, the ruling Democratic Party's digital asset task force held a meeting with the Financial Services Commission, the top financial regulator, on Tuesday.

While the representatives reportedly settled on a 20% ownership cap, they also agreed to allow stakes of up to 34% in exceptions defined by the FSC through enforcement decrees.

For major exchanges such as Upbit and Bithumb, the new limit would take effect following a three-year grace period once the legislation is enacted, while smaller exchanges would receive an additional three years to adapt, the report said.

If enacted, the proposed ownership limit would force most major South Korean cryptocurrency exchanges to undergo significant restructuring. For instance, Bithumb Holdings currently controls over 73% of Bithumb, while Binance holds more than 67% of Gopax — both far exceeding the anticipated 20% cap on major shareholders and potentially requiring substantial divestments or ownership dilutions.

The Block has reached out to the FSC for further information.

Pushback

In January, the FSC proposed the ownership limit as a measure to address potential governance risks from concentrated ownership.

This sparked strong opposition from the Digital Asset Exchange Alliance (DAXA) — the self-regulatory organization representing South Korea's five major cryptocurrency exchanges, including Upbit and Bithumb.

DAXA warned that capping major shareholder equity in exchanges could "significantly impede" the growth of the country's digital asset industry, arguing that attempts to artificially alter the ownership structures of private companies would undermine the foundation of an emerging industry.

Some local reports suggested that Bithumb’s accidental $43 billion bitcoin transfer last month fueled regulatory concerns over the industry's internal controls and risk management, potentially influencing the latest decision.

Digital Asset Basic Act

The ownership cap is expected to be included in the Digital Asset Basic Act, South Korea's upcoming comprehensive set of regulations for crypto. It is set to cover other major topics such as stablecoin issuance and crypto exchange-traded funds in the nation.

Originally targeted for rollout in 2025, the legislation has faced delays that pushed back the timeline. However, the FSC is now expected to finalize its legislative proposal soon, according to a Wednesday report from Hankyung.