South Korea is gearing up for a transformative shift in its cryptocurrency regulations, introducing ownership caps for major shareholders of crypto exchanges. This move comes as part of the Financial Services Commission’s (FSC) efforts to elevate these exchanges to a status akin to public infrastructure under the Digital Asset Basic Act. However, this proposal has stirred industry opposition and political debate.
Regulatory Shift: From Notification to Authorization
Previously, South Korean cryptocurrency exchanges operated under a notification system, requiring renewal every three years. Under the proposed legislation, this will transition to an authorization framework, granting exchanges permanent operating status. According to FSC Chairman Lee Eog-weon, this elevated status demands stricter governance, as exchanges would effectively function as part of the country’s public infrastructure.
Ownership Caps: Key Details
The FSC has proposed an ownership restriction of 15-20% for major shareholders of cryptocurrency exchanges, aiming to mitigate risks of excessive influence and conflicts of interest. For reference, Dunamu, the operator of Upbit, and Coinone would face significant restructuring, given that their current ownership stakes exceed the proposed limits. Chairman Lee argues these caps align with limitations already present in other financial sectors like securities exchanges.
Industry Pushback
Unsurprisingly, the proposed regulation has faced strong opposition from the cryptocurrency industry. Leading domestic exchanges like Upbit and Coinone, represented by a joint council, argue that such measures would stymie innovation and competitiveness, especially when compared to international counterparts where similar restrictions are rare or absent. The ruling Democratic Party echoed these concerns, emphasizing that setting ownership caps could create a regulatory divergence from global standards.
Balancing Oversight with Innovation
Political complexities add layers to the legislative process. Although there’s broad agreement on the need to fortify the regulatory framework, the scope and timing of these measures remain under discussion. The Digital Asset Basic Act is a critical step forward, but its implications must be carefully evaluated to ensure South Korea remains a competitive hub for digital asset innovation.
Why It Matters
For the average investor and cryptocurrency enthusiast, these regulatory measures signal a turning point for the industry in South Korea. Enhanced governance can foster a safer and more transparent environment, but it may also affect the agility and growth of local platforms. As this legislation unfolds, stakeholders should keep a close eye on its impact on the broader cryptocurrency market.
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