According to the latest report from South Korean public broadcaster KBS, the Financial Services Commission (FSC) has proposed a major regulatory recommendation in the Digital Assets Basic Act submitted to the National Assembly. The recommendation is to limit the shareholding ratio of major shareholders in the four major domestic virtual asset exchanges, Upbit, Bithumb, Coinone, and Korbit, with a suggested upper limit between 15% and 20%.
The Financial Services Commission pointed out that these exchanges are now considered "core infrastructure" in the virtual asset circulation system, with a total of tens of millions of users. However, their governance structure is still highly concentrated in the hands of a few founders and major shareholders, which may pose a risk to market fairness and user protection.
Regulatory authorities believe that under the current structure, the huge profits generated by exchanges through transaction fees and other means are excessively concentrated in the hands of specific individuals or related companies. It is necessary to establish a more stringent "major shareholder eligibility review mechanism" in accordance with the standards of the Alternative Trading System (ATS) in the Capital Markets Act, in order to improve transparency and decentralize management.
If shareholding restrictions are implemented, they could impact exchange governance and M&A plans.
If the shareholding restriction is ultimately passed by law, the existing shareholding structures of several major South Korean exchanges may face drastic adjustments.
Taking Upbit, the market leader, as an example, its operating company Dunamu's chairman, Song Chi-hyung, currently holds approximately 25% of the shares. If the new regulations are implemented, Song Chi-hyung may need to sell up to about 10% of the shares, which will not only affect his control over the company but may also impact Dunamu's major strategic plans.
Further Reading: Naver to acquire Upbit's parent company Dunamu for $10.3 billion! Is a Korean version of "PayPal + Coinbase" born?
On the other hand, the impact on Bithumb and Coinone may be more significant. Bithumb is currently 73% owned by Bithumb Holdings, and once it is required to meet the shareholding dispersion standard, it will inevitably face pressure to release a large number of shares, which may even shake its existing governance structure. Coinone, with its chairman holding as much as 54% of the shares, will find it almost impossible to maintain its existing management control if it is required to comply with the new system.
Industry insiders worry that while mitigating risks, this could jeopardize operational stability.
The Financial Services Commission's proposal has drawn differing opinions within South Korea's virtual asset industry. Some industry players believe that the government's move goes beyond market guidance and may constitute excessive intervention, thereby weakening business flexibility and innovation.
Some argue that the second phase of the Digital Assets Fundamental Act was originally intended to promote industrial development and strengthen investor protection. However, if major shareholders are forced to release a large number of shares, it may not only lead to instability in management but also involve interference with private property rights. How to strike a balance between "market order" and "corporate governance freedom" will be a major test in the legislative process.
