In a significant policy shift, the South Korean government and the ruling party have reached consensus on a draft regulation that will limit individual ownership stakes in domestic cryptocurrency exchanges. The proposal seeks to curb any single entity from holding more than 20 percent in a local crypto exchange – a move expected to directly impact industry giants like Upbit and Bithumb, which currently dominate the digital assets market in the country.
Ownership Caps Aim to Tackle Market Concentration
Emerging from joint deliberations between the Digital Asset Task Force within the Democratic Party and the Financial Services Commission, the draft law is intended to disperse concentrated power in the digital asset sector. If enacted, exchanges will be required to restructure their ownership to comply with the new threshold within three years. The authorities are considering an additional three-year extension specifically for small and medium-sized platforms to allow for a more gradual transition.
This adjustment period poses a major challenge for the big players, which currently control nearly 90 percent of the market’s total volume. For instance, Song Chi-hyung, chairman of Upbit’s board, reportedly holds over 25 percent of his company, while Bithumb’s parent group exercises control exceeding 70 percent. Other exchanges such as Coinone, Korbit, and GOPAX also exhibit similar patterns of concentrated ownership, which would need substantial alteration under the proposed rules.
Considering South Korea’s Commercial Act, which recognizes a 33.3 percent ownership stake as a veto threshold, regulators may allow certain exemptions for newly established companies—potentially permitting up to 34 percent ownership without breaching key legal boundaries.
Legislative Process Raises Industry Concerns
The proposal now awaits review by the National Assembly. While some regulators have endorsed the initiative, industry reaction has been mixed. Critics warn that imposing such an ownership cap could stifle innovation and hinder healthy competition within South Korea’s burgeoning crypto sector. Industry insiders have described the measure as unprecedented on a global scale and voiced fears that higher entry barriers could discourage new platforms from entering the market.
One sector representative remarked that very few countries have implemented comparable restrictions, warning the rule could ultimately limit competition.
This debate unfolds against the backdrop of tighter regulatory oversight by Seoul in recent months. Early in 2024, the National Assembly passed new provisions that imposed stricter licensing requirements for digital asset service providers. These regulations also expanded due diligence on shareholders and management, deepening transparency obligations sector-wide.
Regulators are now also considering measures that would increase information disclosure obligations for crypto investors. These escalating reforms highlight South Korea’s commitment to comprehensive oversight of the rapidly evolving digital asset landscape.
