South Korea's cryptocurrency industry regulation is once again embroiled in controversy. Regarding the second phase of legislation for the "Digital Assets Basic Law" pushed by the ruling party, @100y_eth, research director at the South Korean research firm FourPillars, stated bluntly that if the bill includes a "cap on shareholdings in exchanges," it will have a severe impact on the industry structure and capital markets, and may even change the ownership structure of South Korea's centralized exchanges (CEXs).
The core controversy: Treating CEXs as ATSs and restricting major shareholders' shareholding.
@100y_eth points out that the "Digital Assets Basic Law Phase 2," currently being discussed in the South Korean National Assembly, is positioned similarly to the US's cryptocurrency market structure bill, aiming to establish a clear legal framework for the cryptocurrency industry. However, the ruling Democratic Party has officially stated that it will include "shareholding caps for major shareholders of exchanges" in the bill.
This policy logic stems from South Korea's current Capital Markets Act, which stipulates that major shareholders of alternative trading systems (ATS) cannot hold more than 15% of the shares. This means the government considers CEXs (Converted Exchanges) to function similarly to ATSs and therefore advocates applying the same shareholding restrictions to crypto exchage to ensure market fairness and prevent the concentration of power. However, @100y_eth argues that this analogy itself is highly controversial because the business models of crypto exchage are fundamentally different from those of traditional securities trading infrastructure.
What would happen if the "Digital Assets Basic Law Phase 2" were passed?
According to FourPillars' analysis, once the bill takes effect, major shareholders of South Korea's five largest exchanges—Upbit, Bithumb, Coinone, Korbit, and Gopax—will be forced to sell between approximately 5% and 58% of their holdings. @100y_eth describes this as a policy shock that would be a structural restructuring, equivalent to direct government intervention in the capital structure of existing companies, rather than simply an upgrade in regulation.
The timing of this policy has further shaken the market. In recent years, major South Korean financial and technology companies have been actively expanding into the crypto industry. For example, Naver Financial has assessed the acquisition of Upbit's equity, and Mirae Asset has discussed the possibility of investing in Korbit. If the shareholding cap is implemented, large institutions will find it difficult to acquire controlling stakes, effectively squeezing the space for mergers and acquisitions (M&A). @100y_eth believes this will slow down industry consolidation and institutionalization, weakening the long-term competitiveness of South Korean exchanges.
Political polarization intensifies: Capitalism or quasi-nationalization?
The largest opposition party has strongly opposed the clause. Opponents argue that in a capitalist country, forcing major shareholders of companies that have reached a certain size to sell their shares is essentially excessive market intervention. @100y_eth bluntly stated that if the policy is implemented, the practice of "the government forcing companies to sell their shares" is far removed from the principles of a market economy, and even raises questions about whether its policy thinking is close to socialist-style ownership intervention.
Despite South Korean President Lee Jae-myung of the Democratic Party's repeated positive statements on issues such as cryptocurrency ETFs and stablecoins, local industry insiders likely share a different view. ABMedia exclusively obtained the opinion of a South Korean blockchain industry figure who, even before the "Digital Assets Basic Law Phase 2" issue gained traction, believed Lee Jae-myung's positive statements on cryptocurrencies were merely a way to buy policy support. Furthermore, the attitude of regulatory authorities makes it difficult for local exchanges to operate.
Is Lee Jae-myung truly crypto-friendly? Why does the South Korean industry oppose the ruling party's Digital Assets Basic Law? This article first appeared on ABMedia ABMedia .
