Synopsis: South Korea caps crypto exchange major shareholder ownership at 20% (34% max in special cases) to treat platforms as public infrastructure like banks. Upbit, Bithumb face 3-year restructure; industry warns of growth chill.
Regulators push sweeping ownership rules that could force South Korea’s biggest crypto exchanges to restructure.
South Korea is tightening its grip on the cryptocurrency industry. Regulators and the ruling Democratic Party have agreed to limit major shareholders in crypto exchanges to just 20% ownership. The decision could force the country’s largest platforms to completely overhaul their ownership structures.
The Financial Services Commission (FSC) and the Democratic Party’s digital asset task force reached the agreement after weeks of closed-door meetings. Furthermore, certain cases may allow stakes up to 34% but only under special enforcement decrees. The proposal now heads toward formal legislation.
A Push to Treat Crypto Like Public Infrastructure
South Korea’s top financial regulator does not see crypto exchanges as ordinary businesses. The FSC has said it views these platforms as “public infrastructure,” similar to banks and traditional financial firms. As a result, the regulator wants oversight rules that match that standard.
Moreover, background checks on major shareholders have already been expanded. They now include non-financial crimes such as tax evasion and violations of fair-trade laws. The proposed cap builds directly on these stricter entry requirements for exchange owners.
Upbit and Bithumb the two biggest exchanges together control nearly 90% of South Korea’s local crypto market. Regulators say this level of concentration creates real risks for investors. Limiting ownership stakes is their main tool to address this.
In addition, lawmakers plan to include the cap in the Digital Asset Basic Act. That bill also covers stablecoin issuance and cryptocurrency exchange-traded funds, or ETFs. The FSC is expected to finalize its legislative proposal very soon.
Major Exchanges Face Forced Ownership Overhaul
Several leading exchanges would need to make significant changes if the law passes. Currently, Bithumb Holdings controls over 73% of Bithumb. Binance owns more than 67% of Gopax. Coinone’s chairman holds about 53%, and Mirae Asset is set to hold 92% of Korbit after its acquisition.
Even Upbit’s parent company is affected. Chairman Song Chi-hyung holds around 25.52% already above the proposed 20% cap. As a result, he would need to reduce his stake once the law takes effect.
However, regulators have built in time to comply. Major exchanges with significant market share will receive a three-year grace period. Smaller platforms those with less than 20% market share may get up to six years to meet the new rules. This phased approach aims to avoid sudden market disruption.
Besides that, the government says it plans to gradually allow corporate investors into the crypto market. Divestment by current major shareholders could open the door to new institutional investors, reshaping who holds power in South Korea’s digital asset sector.
Industry Warns of Chilling Effect on Growth
Not everyone welcomes the change. The Digital Asset Exchange Alliance, which represents South Korea’s five major exchanges including Upbit and Bithumb, pushed back strongly. It warned that the cap could “significantly impede” the growth of the entire industry.
Industry insiders call the rule “unprecedented.” They argue it could weaken domestic exchanges in their competition against global platforms. Furthermore, critics warn it may slow innovation and reduce competition inside the market.
There are also concerns about foreign investment. The cap could signal to overseas companies that taking a controlling stake in a South Korean exchange is effectively off the table. Therefore, future foreign takeovers or majority investments may become far less attractive.
Earlier proposals suggested a cap as low as 15%, which faced even stronger resistance. The 20% figure with a 34% exception appears to be a compromise after industry groups and some Democratic Party advisors raised concerns about property rights and the risk of businesses moving abroad.
Also Read: What Does a “Fully Onchain Economy” Actually Mean? Let’s Take the Case of Bermuda
What Sparked the Crackdown?
Some analysts linked the regulatory push to a recent high-profile incident. Last month, Bithumb accidentally transferred approximately $43 billion worth of bitcoin. The transfer raised immediate questions about internal controls at major exchanges.
However, regulators have not officially confirmed a direct link between that incident and the ownership decision. Still, the episode added urgency to existing concerns about governance at platforms with highly concentrated ownership.
South Korea has been steadily building out its crypto rulebook since 2024, when the Virtual Asset User Protection Act began phasing in. The ownership cap fits into that broader effort. Together, these measures aim to bring the crypto sector in line with the standards applied to traditional financial institutions.
The legislation still needs to pass through the National Assembly. Details may continue to evolve as lawmakers debate the final version of the Digital Asset Basic Act. For now, South Korea’s crypto industry faces a clear message from its government: the era of unchecked ownership concentration is coming to an end.
Written by Fazal Ul Vahab C H
