Written by: KarenZ, Foresight News
Original title: South Korean Exchanges Face Overhaul? Regulatory Authorities Propose 15%-20% Shareholding Cap for Major Shareholders
As 2025 approaches its conclusion, the Financial Services Commission (FSC) of South Korea has put forward a proposal in the "Second Phase of Virtual Asset Legislation" aimed at promoting market institutionalization: requiring major domestic cryptocurrency exchanges to significantly reduce the shareholding ratios of their large shareholders.
According to data from a National Assembly report obtained by KBS, the FSC's positioning of cryptocurrency exchanges has undergone a fundamental shift. South Korean exchanges with over 11 million active users will be defined as "core infrastructure" for virtual assets. This is interpreted by the market as referring to the four exchanges: Upbit, Bithumb, Coinone, and Korbit.
This shift in positioning may provide a basis for stricter regulatory intervention.
Regulation Targets the Core: Two Major Structural Malformations
Regulatory authorities sharply pointed out that the current governance structure of exchanges suffers from serious malformations:
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1. Excessive Concentration of Power: A small number of founders or major shareholders hold absolute decision-making power over platform operations, lacking effective checks and balances. This management model can lead to conflicts of interest and moral hazards when facing major decisions.
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2. Privatization of Benefits: The substantial transaction fee revenue generated by exchanges, as infrastructure, disproportionately flows into the pockets of specific individuals. The fairness of this revenue distribution has raised widespread doubts.
Shareholding Ratio for Major Shareholders Capped Between 15% and 20%
To address this issue, the FSC proposed introducing a major shareholder suitability review system similar to that of the "Alternative Trading System (ATS)" in the securities market, suggesting that the shareholding ratio of exchange major shareholders be limited to between 15% and 20%.
According to KBS, under the current Capital Markets Act, major shareholders and specially related persons of an ATS cannot hold more than 15% of voting shares, with an exception allowing up to 30% only in cases of public offering funds or special approval from the FSC.
The setting of this standard reflects the regulatory intent to align the governance structure of cryptocurrency exchanges more closely with that of traditional financial institutions, moving from wild growth to standardized governance.
Pressure on the Four Major Exchanges
If this proposal is passed and implemented, the governance structures of South Korea's four major exchanges will face unprecedented restructuring challenges:
1. Upbit (Operator Dunamu): Dunamu's Chairman holds 25.5% of the shares
As the absolute dominant player in the South Korean virtual exchange market, Upbit is the first to be affected. As referenced in the author's previous article "Naver 'Swallows' Upbit: A 'Premeditated' Move for Won Stablecoin Dominance," citing a report from The Dong-A Ilbo, Dunamu's major shareholders include Chairman of the Board Song Chi-hyung, holding approximately 25.5%. If the proposal passes, he would be forced to sell about 5% to 10% of his shares.
More critically, Dunamu is currently advancing a stock swap and merger with Naver Financial (the financial subsidiary of South Korean internet giant Naver). The new regulations would not only dilute the founder's control but could also trigger deep regulatory concerns about market concentration. The regulators seem intent on preventing the emergence of monopolistic platforms.
2. Bithumb: Bithumb Holdings holds 73% of the exchange's shares
Bithumb's ownership structure is even more concentrated. According to KBS, its holding company, Bithumb Holdings, holds 73% of the exchange's shares. To meet the sub-20% shareholding standard, Bithumb Holdings would have to sell or transfer over 50% of its equity. This is not a simple reduction but could mean a fundamental reshaping of the entire group's holding structure.
3. Coinone: The Chairman holds 54% of the shares
For Coinone, Chairman Cha Myung-hoon currently holds 54% of the shares, a typical "absolute majority control" model. If he disposes of over 34% of his shares, it would mean losing absolute control of the company.
For a mid-sized exchange like Coinone, once dominant management control is lost, whether the company can maintain strategic continuity becomes an unknown. This is more than just a share adjustment.
4. Korbit: NXC and its subsidiaries collectively hold about 60.5% of the shares
Previously, according to The Chosun Ilbo, Korbit is currently held about 60.5% by NXC and its subsidiary Simple Capital Futures collectively, with SK Square holding another approximately 31.5%. In late December, Mirae Asset was reportedly in talks to acquire 92% of Korbit, with a transaction value of up to 140 billion won (approx. $97 million). Mirae Asset is also a shareholder of Naver Financial.
If Mirae Asset completes the acquisition and the proposal passes, it would also have to face the shareholding limit; if the acquisition is shelved due to the new regulations, how would Korbit's existing shareholders cope with the forced divestment?
The Logic and Concerns Behind the Regulation
Behind this proposal lies the clear intent of regulators to promote "high institutionalization" of the crypto market—using the mature systems, risk control capabilities, and compliance culture of traditional finance to reform the roughly developed crypto exchange industry and reduce systemic risk.
Some analysts believe that forcing major shareholders to reduce their stakes is essentially paving the way for traditional financial institutions like banks and securities firms to enter the market. Capital-rich financial giants may become the buyers of these shares. This could accelerate the "high institutionalization" of South Korea's crypto market.
However, controversies are also prominent. From an innovation perspective, could this stifle the native vitality of the crypto industry? According to a viewpoint cited by KBS, forcibly applying the equity dispersion rules of traditional stock exchanges to the virtual asset exchange industry is like "cutting the feet to fit the shoes." Forcing founders to sell severely infringes on private property rights and could lead to management instability, ultimately harming investor protection. Although the "Second Phase of Virtual Asset Legislation" includes positive news such as the legalization of stablecoins and market access standardization, this "Sword of Damocles" hanging over the exchanges still worries the market.
The market widely worries that if the proposal passes, exchanges could fall into governance chaos, strategic wavering, or even control battles, leading the industry into a prolonged adjustment period. During this time, crypto-friendly jurisdictions like Singapore and Dubai might seize the opportunity to attract South Korean crypto businesses and capital outflow, weakening the competitiveness of the local blockchain industry.
Summary
Regardless of the final outcome, this contest is stirring the discourse and power structure of South Korea's crypto market.
Exchanges can no longer consider themselves purely market entities, and regulators must also find a delicate balance between financial stability and industry development.
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