The FSC of South Korea is determined to cap ownership ratios on digital asset exchanges despite opposition from the DAXA and the ruling party, in order to standardize governance standards.
The South Korean Financial Services Commission (FSC) is strongly pushing an initiative to cap the ownership stake of major shareholders in cryptocurrency exchanges at 15-20%, despite opposition from both the industry and political circles. FSC Chairman Lee Eog-weon stated on Wednesday that the proposal aims to align governance standards with the growing public Vai of exchanges in the cryptocurrency industry.
Lee's remarks demonstrate the financial regulator's determination to reform the legal framework, despite opposition from the Korea Digital Asset Exchange Alliance (DAXA) and the ruling Democratic Party of Korea. This proposal is expected to be included in the second phase of the legal system for virtual assets, specifically the Digital Asset Basics Act.
Switching from notification to authorization
Mr. Lee explained that existing laws such as the Law on Reporting and Use of Specific Financial Transaction Information and the Law on Protection of Virtual Asset Users primarily focus on anti-money laundering and investor protection. The new legal system aims to become a comprehensive legal framework regulating the entire cryptocurrency industry.
Currently, digital asset exchanges operate under a notification mechanism with renewal requirements every three years. The FSC chairman believes that switching to a licensing mechanism will elevate the legal status of domestic exchanges, transforming them into permanent operating organizations in South Korea. This higher status requires exchanges to adopt governance rules commensurate with their greater Vai and responsibilities.
“Excessive concentration of ownership can increase the risk of conflicts of interest and undermine market integrity. Stock exchanges and alternative trading systems are already subject to ownership limits, so applying similar standards to virtual asset platforms makes sense,” Lee argued.
The FSC chairman also acknowledged that this initiative is part of a broader effort to integrate cryptocurrency exchanges into the mainstream financial system, strengthening accountability, transparency, and the public interest.
A strong backlash from industry and politics.
DAXA strongly opposed the FSC's proposal, warning that imposing ownership caps could hinder the development of the virtual asset industry in South Korea. The coalition council representing major domestic exchanges such as Coinone and Upbit argued that the regulation would seriously impact the current ownership structure.
At Dunamu, the operator of Upbit, Chairman Song Chi-hyung and related parties hold more than 28% of the shares. Coinone founder Cha Myung-hoon holds approximately 53% of the company's shares. The new law will force these shareholders to divest a significant Capital .
The Democratic Party of Korea also argued that similar caps on shareholder ownership ratios in cryptocurrency exchanges are not common internationally, and that imposing caps could put South Korea out of sync with global regulatory trends.
In response to concerns, Mr. Lee said he was in close contact with the ruling party. He stressed that while there was broad consensus on the need for the initiative, discussions were ongoing regarding its scope and timing. The FSC chairman pledged to continue consultations with the National People's Congress and relevant ministries to ensure the Digital Asset Basic Act is implemented without unnecessary delays.
The FSC previously announced plans to allow more than 3,500 listed companies and professional investors to invest directly in crypto assets, with a maximum limit of 5% of Capital . The Framework Law on Digital Assets is expected to be introduced in the first quarter of this year.
