Understanding South Korea’s New Crypto Exchange Regulations
In a groundbreaking move, South Korea’s Financial Services Commission (FSC) has proposed a regulatory framework aimed at reshaping the governance of the nation’s largest cryptocurrency exchanges. These changes, targeting companies like Upbit, Bithumb, Coinone, and Korbit, aim to limit shareholder ownership while safeguarding consumer interests and ensuring fair market practices.
Key Changes in Stakeholder Ownership
Under the new regulations, major crypto exchanges serving approximately 11 million users will face stricter governance rules. The FSC’s Digital Asset Framework Act designates these high-volume platforms as “core infrastructure” under virtual asset distribution, subjecting them to oversight similar to organizations under the Capital Markets Act.
The proposed cap on ownership stakes by major shareholders will range between 15% and 20%, prompting significant divestments by key stakeholders. For instance, Dunamu’s Chairman Song Chi-hyung, who currently holds a 25% stake in the exchange Upbit, is expected to sell up to 10% of his ownership to meet the cap. Similarly, Bithumb Holdings, owner of a 73% stake in Bithumb Exchange, faces a considerable restructuring of its management and governance structures.
The Debate Over Ownership Concentration and Market Stability
The FSC has expressed concerns about the concentration of control among founding shareholders, stating, “A small number of founders and shareholders exert excessive control over the overall operation of these exchanges.” The goal is to promote dispersed ownership, which is considered essential for maintaining a fair and transparent market.
Critics within the crypto industry argue that these regulatory measures could destabilize operations and infringe upon property rights. Industry voices have raised alarms, saying: “Excessive regulations risk shaking management control and may encroach on individual property rights.” Other stakeholders believe regulatory reforms should strike a balance by fostering growth in the virtual asset business.
Impact on South Korea’s Crypto Landscape
If implemented, these changes could have significant ripple effects on the cryptocurrency industry in South Korea. For example, Dunamu’s ongoing merger negotiations with Naver Financial may be impacted by the uncertainty surrounding ownership restrictions, potentially altering the deal’s final structure. On the other hand, these ownership caps aim to encourage greater market stability, transparency, and consumer protection.
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