Original Author: KarenZ, Foresight News
As 2025 approaches its end, the Financial Services Commission (FSC) of South Korea has proposed a key measure in the "Second Phase of Virtual Asset Legislation" aimed at promoting market institutionalization: requiring major shareholders of domestic cryptocurrency exchanges to significantly reduce their shareholding ratios.
According to data from a congressional report obtained by KBS, the FSC's positioning of cryptocurrency exchanges has undergone a fundamental shift. 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 major exchanges: Upbit, Bithumb, Coinone, and Korbit.
This shift in positioning may provide a legal basis for stricter regulatory intervention.
Regulation Targets the Core: Two Major Governance Structure Issues
Regulatory authorities sharply pointed out that the current governance structure of exchanges is severely flawed:
- 1. Excessive Concentration of Power: A few 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 during major decisions.
- 2. Privatization of Profits: The substantial transaction fee revenue generated by exchanges as infrastructure disproportionately flows into the pockets of specific individuals. The fairness of this profit distribution has raised widespread doubts.
Major Shareholders' Ownership Cap Proposed Between 15% and 20%
To address this issue, the FSC proposed introducing a major shareholder suitability review system similar to that for "Alternative Trading Systems (ATS)" in the securities market. It suggests capping the shareholding ratio of major exchange shareholders 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 rights shares. An exception allows holdings up to 30% only for publicly offered funds or with special approval from the FSC.
This standard reflects the regulatory intent to align the governance structures of cryptocurrency exchanges more closely with traditional financial institutions, moving from wild growth towards 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 Chairman holds 25.5% of shares
As the dominant leader in the 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 KRW Stablecoin Dominance," citing a Dong-A Ilbo report, Dunamu's major shareholders include Chairman Song Chi-hyung, who holds approximately 25.5% of shares. If the proposal passes, he would be forced to sell about 5% to 10% of his shares.
More critically, Dunamu is currently progressing with a stock swap and merger with Naver Financial (the financial subsidiary of Korean internet giant Naver). The new rules would not only dilute the founder's control but could also trigger deep regulatory concerns about market concentration. 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, owns 73% of the exchange's shares. To meet the sub-20% 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 control structure.
3. Coinone: Chairman holds 54% of 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 uncertain. This is more than just an equity adjustment.
4. Korbit: NXC and subsidiaries hold approximately 60.5% equity combined
Previously, according to the Chosun Ilbo, Korbit is currently held approximately 60.5% by NXC and its subsidiary Simple Capital Futures combined, with SK Square holding another ~31.5%. In late December, Mirae Asset was reportedly in talks to acquire 92% of Korbit, valuing the deal up to 140 billion KRW (~$97 million USD). Mirae Asset is also a shareholder of Naver Financial.
If Mirae Asset completes the acquisition and the proposal passes, it would also face ownership cap restrictions. If the acquisition is shelved due to the new rules, how will Korbit's existing shareholders handle the forced divestment?
The Logic and Concerns Behind the Regulation
Behind this proposal lies the clear intent of regulators to push for the "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 fray. Capital-rich financial giants could become the buyers of these shares, potentially accelerating the "high institutionalization" of South Korea's crypto market.
However, controversies are equally prominent. From an innovation perspective, could this stifle the native vitality of the crypto industry? A viewpoint cited by KBS argues that强行 applying the equity dispersion rules of traditional stock exchanges to the virtual asset exchange industry is "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 many positive signals like stablecoin legalization and market access standardization, this "Sword of Damocles" hanging over the exchanges still makes the market deeply anxious.
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 Korean crypto businesses and capital outflow, weakening the competitiveness of the domestic blockchain industry.
Summary
Regardless of the final outcome, this contest is stirring the discourse and power dynamics within South Korea's crypto market.
Exchanges can no longer position themselves purely as market entities, and regulators must also find a delicate balance between financial stability and industry development.
