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S Korea’s proposed crypto law criticized over shareholder equity cap
South Korea’s proposed second-phase virtual asset law faces criticism over a clause that limits major shareholders’ equity in crypto exchanges to 15–20 percent, with concerns it may violate the Constitution.
Critics argue that forcing existing shareholders to sell their stakes could infringe on property rights protected by the constitution and contradict international practices.
Legal experts, including attorneys from Shin & Kim LLC and Law Firm Yulam, say the equity cap may breach constitutional principles by imposing excessive restrictions.
Unlike South Korea, most advanced countries, such as the US, Japan, and the EU, focus on regulating management conduct rather than ownership levels.
Industry voices warn that such restrictions could weaken responsible management and hinder innovation, especially in a sector still establishing its regulatory framework.
The law’s introduction has been delayed amid ongoing debates, with discussions on related issues like virtual asset ETFs and listed company transactions still pending.
🔗 Source: Chosunbiz
🧠 Food for thought
Implications, context, and why it matters.
Regulators see crypto exchanges as public infrastructure
- South Korea’s Financial Services Commission (FSC) backs a proposed ownership cap that limits major shareholders’ equity in crypto exchanges to 15–20 percent. The FSC argues that crypto exchanges operate like public infrastructure, so they need governance rules similar to traditional securities exchanges and alternative trading systems 1.
- The plan fits a broader move toward an authorization and licensing system for exchanges. Under this approach, exchanges would operate as long term institutions and face tougher governance rules plus closer public oversight 1.
- The 15–20% ceiling would hit the five major won-based domestic exchanges, where ownership often sits with a small group. Coinone founder Cha Myung-hoon holds about 53% of Coinone, while Bithumb Holdings owns about 73.56% of Bithumb 2.
The proposal could complicate M&A deals and reshape market structure
- Uncertainty around the cap could slow large deals, including Naver’s planned stock swap tied to Upbit operator Dunamu and Mirae Asset’s talks to buy Korbit 2.
- The limit would also reach foreign controlled firms. Binance owns over 67% of GOPAX shares 3.
- Separately, the FSC is drafting guidelines that let listed companies plus professional investors put up to 5% of equity capital into certain digital assets. These rules would bring digital assets further into the formal economy within clear limits 4.
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