South Korea to Cap Crypto Exchange Ownership at 20%

South Korean regulators and lawmakers have agreed to cap major shareholder stakes in cryptocurrency exchanges at 20%, despite opposition from the industry.

The ruling Democratic Party’s digital asset task force met with the Financial Services Commission (FSC) on Tuesday to discuss the measure, according to the Korea Herald.

The FSC may grant exceptions allowing stakes of up to 34% through enforcement decrees.

For major exchanges such as Upbit and Bithumb, lawmakers will enforce the cap after a three-year grace period once the legislation passes.

Smaller exchanges would receive an additional three years to comply.

The limit would require significant restructuring for leading exchanges.

Bithumb currently controls over 73% of Bithumb, while Binance holds more than 67% of Gopax, far exceeding the proposed 20% cap, potentially necessitating divestments or ownership dilution.

The FSC proposed the ownership limit in January to mitigate governance risks associated with concentrated ownership, as reported by The Block.

The measure has faced strong pushback from the Digital Asset Exchange Alliance (DAXA), which represents South Korea’s five largest crypto exchanges.

DAXA warned that capping major shareholder stakes could “significantly impede” industry growth, arguing that altering private ownership structures could undermine the emerging sector.

Bithumb’s accidental US$43 billion bitcoin transfer last month reportedly heightened regulatory concerns, exposing weaknesses in the exchange’s internal controls and risk management.

Lawmakers plan to include the ownership cap in the Digital Asset Basic Act, South Korea’s forthcoming comprehensive framework for crypto regulation.

The legislation will also cover stablecoin issuance and cryptocurrency exchange-traded funds.

Featured image credit: Edited by Fintech News Hong Kong, based on image by burgermin and hamzaazeem1387 via Freepik

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