South Korea Moves to Limit Ownership Stakes of Major Crypto Exchanges
South Korea is tightening control over its largest cryptocurrency exchanges, targeting platforms serving over 11 million users, including Upbit, Bithumb, Coinone, and Korbit.
The Financial Services Commission (FSC) has proposed a new framework under the Digital Asset Framework Act that would cap individual ownership of voting shares between 15 and 20 percent.
The move forces current major shareholders to sell portions of their holdings if they exceed the proposed limits, reshaping the governance of the nation’s most prominent crypto platforms.
Why Regulators Target Exchange Ownership
The FSC classifies high-volume exchanges as “core infrastructure” for virtual asset distribution, placing them under stricter governance standards similar to alternative trading systems under the Capital Markets Act.
Regulators cite concentrated control by founders and top shareholders as a primary concern.
The FSC stated,
“There is an issue where a small number of founders and shareholders exercise excessive control over the operation of the exchange.”
Officials also noted,
“huge operating profits such as fees are concentrated on specific individuals.”
The commission emphasises that more dispersed ownership is necessary to protect consumers and maintain fair market operations.
Current alternative exchange regulations already limit voting share ownership to 15 percent, with exceptions up to 30 percent requiring explicit FSC approval or public fund involvement.
The new rules extend similar standards to cryptocurrency platforms, fundamentally altering their ownership structures.
Who Will Be Most Affected by the Caps
Dunamu, the operator of Upbit and South Korea’s largest exchange, will face notable changes.
Chairman Song Chi-hyung holds approximately 25 percent of the company.
Under the new rules, he would need to sell between 5 and 10 percent of his shares.
Dunamu’s Chairman Song Chi-hyung
The timing adds complexity as Dunamu is pursuing a merger with Naver Financial through a comprehensive stock exchange, making the ownership limits a significant variable in negotiations.
Bithumb Holdings faces even more dramatic adjustments.
Currently owning 73 percent of the exchange, the company would be required to divest a substantial portion of its shares.
Such a move could reshape Bithumb’s governance and operational control entirely.
Coinone presents a similar challenge.
Chairman Cha Myung-hoon holds 54 percent of the company, far exceeding proposed caps.
Compliance would require him to sell more than 34 percent of his stake, potentially impacting management control and strategic decisions.
Coinone’s Chairman Cha Myung-hoon
Industry Pushback and Concerns Over Market Impact
Crypto industry representatives have criticised the FSC’s approach as excessive.
One source said,
“the government is trying to impose excessive regulations beyond market guidelines.”
Critics argue that the measures could infringe on property rights and destabilise company management.
Concerns extend to market consequences.
Forcing owners to sell large stakes could flood the market with exchange shares, driving down prices and eroding value for existing minority shareholders.
There is also uncertainty over whether foreign investors will be allowed to acquire these holdings, despite international interest in the South Korean market.
Political and Regulatory Tensions Complicate Legislation
The implementation of the ownership caps is occurring amid wider regulatory debates.
Stablecoin issuance rules have slowed the passage of related legislation.
The Bank of Korea has indicated that only consortium structures with at least 51 percent bank ownership would be permitted to issue stablecoins.
Meanwhile, political scrutiny is increasing.
Kim Byung-ki, floor leader of the ruling Democratic Party, faces pressure over alleged interference with Upbit, while his son secured an internship at Bithumb.
These controversies add further complexity to an already uncertain regulatory landscape heading into 2026.
The proposed ownership restrictions signal a major shift for South Korea’s crypto market, compelling top shareholders to reduce stakes and raising questions about governance, market stability, and the role of foreign investment in the country’s digital asset sector.
Alex
