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South Korea’s financial regulator is advancing plans to cap individual ownership stakes in cryptocurrency exchanges at 15% to 20%, a move that would force founders of major platforms including Upbit and Coinone to divest significant holdings.
Financial Services Commission Chairman Lee Eog-weon said Wednesday the proposed limits, set to be included in the forthcoming Digital Asset Basic Act, reflect regulators’ view that crypto exchanges now function as systemically important financial infrastructure requiring governance standards comparable to traditional securities markets.
“Virtual asset exchanges are no longer operating on the margins of the economy,” Lee said. “If they are granted permanent operating status, it is reasonable to expect governance standards comparable to other financial market infrastructure.”
The ownership cap proposal is slated to become part of the Digital Asset Basic Act, widely described as the second phase of the country’s virtual asset legislation.
While earlier laws focused largely on anti-money laundering and investor protection, Lee acknowledged those measures fall short of addressing broader governance risks.
Under the new framework, South Korea crypto regulation would shift exchanges from a notification-based system—renewed every three years—to a full authorization regime. Once licensed, exchanges would effectively gain indefinite operating rights, a change Lee said alters their status from purely private ventures to quasi-public institutions.
“This transition fundamentally changes the responsibility exchanges carry,” Lee noted. “Excessive ownership concentration can undermine market fairness and erode trust.”
The FSC argues that formalizing governance standards through South Korea crypto regulation is necessary to ensure long-term market stability as digital assets attract more retail and institutional participation.
Unsurprisingly, the proposal has triggered strong resistance from the crypto industry. A joint council representing major exchanges such as Upbit, Bithumb, and Coinone has warned that ownership caps could stifle innovation and weaken South Korea’s competitiveness in the global digital asset race.
At Dunamu, which operates Upbit, founder and chair Song Chi-hyung and related parties control more than 28% of the company. Coinone founder Cha Myung-hoon reportedly holds around 53%. Under the proposed rules, both would be forced to sell significant portions of their holdings if South Korea crypto regulation moves forward unchanged.
Industry representatives argue that such limits are uncommon internationally and could deter long-term investment. Some lawmakers within the ruling Democratic Party of Korea have echoed those concerns, suggesting the policy may place South Korea out of step with global regulatory norms.
Lee acknowledged the criticism, stating that discussions with lawmakers and stakeholders are ongoing. However, he made it clear that regulatory alignment with international standards does not mean avoiding tougher rules when local market conditions demand them—a recurring theme in recent South Korea crypto regulation debates.
From the regulator’s perspective, concentrated ownership poses tangible risks. The FSC has repeatedly pointed to potential conflicts of interest, opaque decision-making, and weakened internal controls as dangers when founders retain dominant control over exchanges that handle billions of dollars in customer assets.
“Securities markets already recognize these risks, which is why ownership limits exist,” Lee said. “Applying similar logic under South Korea crypto regulation is both reasonable and necessary.”
Analysts note that the proposal reflects a broader shift in how authorities view crypto exchanges—not merely as technology startups, but as core financial intermediaries whose failure could have systemic consequences.
The ownership cap debate comes amid a wider regulatory push. Last month, authorities unveiled plans to expand the so-called travel rule, lowering the threshold for identity verification to cover transactions below 1 million won (about $680). Previously, users could bypass checks by splitting transfers into smaller amounts.
This move, combined with stricter governance proposals, highlights how South Korea crypto regulation is tightening across multiple fronts, from financial crime prevention to corporate oversight.
While the final shape of the Digital Asset Basic Act remains under negotiation, few doubt that South Korea crypto regulation is heading toward a more interventionist model.
Whether ownership caps settle at 15%, 20%, or are adjusted through compromise, the direction of travel is clear: regulators want tighter control over who wields power in the crypto market.
For exchanges, the coming months may bring difficult choices about restructuring ownership and governance. For policymakers, the challenge will be balancing innovation with stability as South Korea crypto regulation continues to mature in one of Asia’s most active digital asset markets.
