South Korea’s Financial Services Commission (FSC) has shared its intention to move forward with the proposed cap on crypto exchange ownership despite concerns from industry players and the ruling Democratic Party of Korea (DPK).
FSC Backs Ownership Cap For Crypto Exchanges
On Wednesday, Financial Services Commission Chairman Lee Eog-weon revealed that the regulatory agency is reviewing a proposal to cap major shareholders’ stakes in crypto exchanges at around 15%-20%.
According to The Korea Times, Lee stressed the need to limit the ownership stakes of controlling shareholders in crypto exchanges, claiming that the move is necessary to “align governance standards with the exchanges’ increasing public role.”
He argued that “excessive concentration of ownership” could increase the risk of conflicts of interest while undermining market integrity, noting that securities exchanges and other trading systems are subject to similar limits.
The chairman highlighted that existing regulations mainly focus on anti-money laundering and investor protection. The ownership cap proposal would be included in the upcoming Digital Asset Basic Act, also known as the Second Phase of the Virtual Asset User Protection Act, which is expected to serve as a comprehensive framework for the entire industry.
“Under the current system, virtual asset exchanges operate under a notification system that requires renewal every three years. The proposed shift to an authorization system would effectively grant exchanges permanent operating status,” Lee explained.
He emphasized that “this higher status means exchanges need governance rules that match their larger role and greater responsibilities.” As a result, exchanges would assume characteristics similar to public infrastructure.
A joint council representing domestic crypto exchanges, including Upbit, Bithumb, and Coinone, has opposed the proposed cap, warning that it could hinder the development of South Korea’s digital asset sector.
Notably, major players like Song Chi-hyung, the chairman of Dunamu, the company that operates Upbit, and Cha Myung-hoon, the founder of Coinone, would be forced to sell significant portions of their holdings if the law is enacted.
The Democratic Party of Korea also expressed its concerns, observing that similar ownership caps are uncommon worldwide and could make South Korea’s framework inconsistent with global regulatory trends.
Lawmakers Set New Deadline For Digital Assets Framework
ChosunBiz reported that the DPK’s Digital Assets Task Force (TF) discussed key details of the Digital Asset Basic Act in a Wednesday meeting at the National Assembly members’ office building, attended by government officials.
According to the report, the ruling party’s members did not discuss the cap on crypto exchange ownership. Still, they revealed that they will introduce the framework before the Lunar New Year holiday on February 17.
DPK’s Lawmaker Ahn Do-geol said, “We plan to introduce the Digital Asset Basic Act before the Lunar New Year, and we hope that by then a plan agreed upon with the government as much as possible will be put together.”
Instead of the “unanimous consent system” proposed by the Bank of Korea (BOK), the task force settled on a consultative body to discuss stablecoin authorizations, comprised of the BOK, the FSC, the Ministry of Economy and Finance, and the Financial Supervisory Service.
The task force considered that requiring unanimity for stablecoin authorization would slow issuance, while observers believe that the central bank’s proposal was “a way to control stablecoins.”
In addition, the minimum statutory capital for stablecoin issuers was set at 5 billion won, approximately $3.48 million. Nonetheless, the report affirmed that there has not been an agreement on the issuance of won-pegged stablecoins.
As reported by Bitcoinist, the BOK and the FSC have been clashing over the extent of banks’ role in stablecoin issuance. While the central bank has been pushing for a consortium of banks owning at least 51% of any stablecoin issuer seeking approval in the country, the FSC has expressed concerns about this proposal.
Lee Kang-il, a DPK lawmaker on the task force, asserted that “the 50%+1 share rule remains contentious because there is still no willingness to concede among government ministries,” but added that they have prepared a mediation plan and will “make decisions in a direction that serves the national interest overall and benefits the public.”
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