South Korea’s government and the ruling party have decided to limit major shareholders of domestic crypto exchanges to a maximum stake of 20%, with a few exceptions for new operators.
This step is intended to improve the regulatory framework and reduce the risks arising from concentrated ownership in the cryptocurrency market of the country.
Proposed Timeline
The ownership limit suggested seems to be in line with the Commercial Act’s 33.3% veto right in general shareholders’ meetings.
Existing exchanges will be given a period of three years after the law is enforced to bring their ownership structures in compliance, and it is also possible that smaller exchanges will be granted an additional 3, year extension. New businesses might be permitted to hold up to 34% ownership as per an enforcement decree.
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Impact on Major Exchanges
Most of the current ownership levels at South Korea’s major exchanges are significantly above the proposed cap.
Upbit chairman Song Chi, hyung’s stake stands at around 25.52%, Bithumb Holdings owns approximately 73.56% of Bithumb, Coinone chairman Cha Myung, hoon has a direct control of about 53.44% while Binance holds around 67.45% of GOPAX. The major shareholders of these exchanges will have to reduce their stake during the initial three, year period.
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Industry Concerns
The proposal is likely to face a time-consuming legislative process, as some lawmakers express concerns about the restriction of ownership in the sector.
An industry insider said that such a measure might limit competition, slow down innovation, and raise the exit barriers even further. South Korea has been tightening the regulations on cryptocurrencies and has recently put in place more stringent entry rules for virtual asset service providers (VASPs).
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