South Korea plans 20% cap on crypto exchange owners

South Korean regulators and the ruling Democratic Party’s digital asset task force have agreed to cap major shareholder stakes in cryptocurrency exchanges at 20%, with exceptions allowing stakes up to 34% under Financial Services Commission enforcement decrees, the Korea Herald reported.

The limit would take effect after legislation is passed, with a three-year grace period for major exchanges and an extra three years for smaller operators, the report said.

If enacted, the cap would likely force major exchanges to restructure ownership because Bithumb Holdings controls over 73% of Bithumb and Binance holds more than 67% of Gopax.

The Digital Asset Exchange Alliance, a self-regulatory organization representing South Korea’s five major exchanges including Upbit and Bithumb, warned the cap could “significantly impede” the industry’s growth.

Some local reports linked regulators’ concerns to Bithumb’s accidental US$43 billion bitcoin transfer last month, but did not confirm a direct connection to the ownership decision.

The cap is expected to be included in the Digital Asset Basic Act covering stablecoin issuance and cryptocurrency ETFs, and, according to Hankyung, the FSC is expected to finalize its legislative proposal soon.

🔗 Source: The Block

🧠 Food for thought

Implications, context, and why it matters.

The proposed ownership cap is part of a strategy to treat exchanges like public utilities

South Korea’s top regulator, the Financial Services Commission (FSC), has said crypto exchanges should be treated as “public infrastructure,” with oversight similar to traditional financial firms 1.
The proposal fits a wider regulatory push. Recent changes expanded background checks on major shareholders. The checks now include non-financial crimes like tax evasion and fair-trade violations 2.
The plan goes after heavy market concentration. Upbit and Bithumb control roughly 90% of the local market 3.
Lawmakers are expected to place the cap in the Digital Asset Basic Act. The bill would also cover stablecoin issuance and cryptocurrency exchange-traded funds (ETFs) 4.

Forced restructuring could reshape the market and may chill foreign investment

If enacted, the rule would likely force large shareholders to cut stakes over a multi-year compliance period. Global exchange Binance owns more than 67% of Gopax. The proposed cap would limit major shareholder stakes in crypto exchanges to 20%, with exceptions allowing stakes up to 34% under Financial Services Commission (FSC) enforcement decrees 3.
Divestment could reshape ownership and bring in new institutional investors. Regulators also plan to gradually permit corporate participation in the crypto market 5.
The cap could discourage future foreign takeovers and investment. It signals South Korea can be hard to enter through majority ownership.
Regulators say the goal is stability. Industry insiders call the cap “unprecedented” and warn it could curb competition, slow innovation, plus weaken domestic exchanges against global platforms 3.