Key Highlights
- South Korea’s ruling party Digital Asset Task Force and the FSC have agreed to cap major shareholder stakes in crypto exchanges at 20%, with exceptions up to 34% via FSC approval.
- Upbit and Bithumb, which together control roughly 90% of Korea’s crypto market, face a three-year grace period after the law takes effect.
- Smaller exchanges including Coinone, Korbit, and Gopax get an additional three-year buffer, effectively giving them six years to comply.
- A formal ruling party-government consultative meeting to confirm the agreement is expected on March 5.
South Korea is moving decisively to break up the concentrated ownership structures at the country’s largest crypto exchanges. The ruling Democratic Party’s Digital Asset Task Force (TF) and the Financial Services Commission (FSC) have agreed to cap major shareholder stakes at 20%, with the formal agreement expected to be confirmed at a closed-door ruling party-government meeting on March 5.
As reported by Herald Economy, the cap marks the conclusion of months of contentious negotiations over one of the most consequential provisions in South Korea’s Digital Asset Basic Act (Phase 2 legislation), which also covers stablecoin issuance rules. While the 20% headline figure is the agreed ceiling, the FSC retains the authority to permit exceptions of up to 34% through enforcement decree; a carveout that gives regulators flexibility without abandoning the structural reform intent.
Upbit and Bithumb first in line
The 20% limit will be applied on a tiered basis depending on exchange size. Upbit and Bithumb, which together account for approximately 90% of Korea’s domestic crypto trading volume, will be the first to face the restriction, with a grace period of three years from the date the law takes effect.
The implications are significant. Upbit is operated by Dunamu, whose Chairman Song Chi-hyung holds roughly 25–28% of shares. Under the new cap, he would be required to divest at least 5–8 percentage points of his stake. The situation at Bithumb is different. Bithumb Holdings currently controls approximately 73% of the exchange and would need to shed the vast majority of that position to comply — a structural overhaul that would fundamentally reshape control of the platform.
Smaller exchanges including Coinone, Korbit, and Gopax will receive an additional three-year deferral on top of the standard grace period, giving them a total of three years before the cap applies. The differential timeline reflects their significantly lower market share, though all five major exchanges will eventually be subject to the same 20% ceiling.
Why Korea is drawing the line
The FSC has consistently framed this regulation as a governance necessity rather than an anti-competition measure. In statements accompanying earlier drafts of the legislation, the commission said there was “an issue where a small number of founders and shareholders exercise excessive control over the operation of the exchange,” adding that “huge operating profits such as fees are concentrated on specific individuals.”
The FSC classifies exchanges serving more than 11 million users, a threshold that covers Upbit and Bithumb, as critical public infrastructure for virtual asset distribution. That designation, the argument goes, justifies applying the same kind of ownership scrutiny already applied to alternative stock exchanges under Korea’s Capital Markets Act, which caps shareholding at 15% with FSC-approved exceptions up to 30%.
The crypto sector has pushed back hard. The Digital Asset eXchange Alliance (DAXA), which represents all five major KRW-based exchanges, called forced ownership restructuring “measures that shake the foundation of the digital asset industry.” CEOs of all five exchanges held a closed-door meeting with Democratic Party TF chair Rep. Lee Jung-moon earlier this month, conveying concerns that the rule could drive Korean exchanges to lose ground to foreign competitors in a borderless market. Coinone CEO Cha Myung-hoon, whose personal stake in the exchange currently sits at around 53%, said after the meeting that the industry’s position had been “fully conveyed.”
The TF’s own advisory panel, composed of nine academics, lawyers, and industry figures, submitted a written opinion stating it was “difficult to justify constitutional issues such as restricting property rights solely on the grounds of concerns over market monopoly.”
What comes next
With the 20% cap and its tiered grace periods now agreed between the TF and the FSC, the ruling party is expected to formally adopt the framework at its March 5 consultative meeting. Legislative passage will follow, though the broader Digital Asset Basic Act, of which this ownership provision is one part, is still working through the National Assembly.
For Upbit and Bithumb, the three-year clock only starts ticking once the law is enacted. But the direction is now clear: Korea’s largest crypto exchanges will need to fundamentally restructure their ownership or find buyers willing to absorb what could be some of the most significant forced share sales in the country’s digital asset history.
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