- Financial Services Commission says crypto exchanges are “public infrastructure.”
- Regulator says caps would prevent conflicts of interest.
- Government and industry oppose the proposal.
South Korean regulators want to block individual shareholders from amassing stakes higher than 20% in domestic crypto exchanges — but face opposition from government and industry figures.
The Financial Services Commission, or FSC, South Korea’s top regulator, has proposed a 15% to 20% cap on share ownership to avoid conflicts of interest.
“As [crypto] exchanges are now officially recognised as part of the financial system, we must create a governance structure that befits their status,” said the FSC chair Lee Eok-won, according to South Korean newspaper Seoul Kyungjae. “We are currently discussing measures to diversify [owners’] stakes in crypto exchanges, including regulations on the distribution of shares.”
As crypto adoption gathers pace in South Korea, deep divisions are forming as regulators, big tech firms, and lawmakers vie for dominance over the sector.
The result, per experts, is a potential impasse.
Government opposes plan
The FSC has asserted that crypto exchanges have become a form of “public infrastructure,” meaning they should be subject to restrictive ownership regulations.
The regulator says the cap should apply not only to single individuals, but also to companies they own.
This is a direct clash with the policies of the ruling Democratic Party, Seoul Kyungjae reported. The party has refused to include such provisions in the Basic Digital Asset Act draft.
The draft bill will mainly focus on the rules surrounding the issuance of won-denominated stablecoins. But the government also wants to include a range of new crypto regulations.
A clash with the government on this matter is now inevitable, the newspaper said, quoting sources familiar with the matter.
“Regulators are very firm in their position on this matter,” an unnamed financial industry insider told the newspaper. “There will be continued friction on this point with industry and political groups, who oppose this measure.”
Compliance challenges
At present, most of South Korea’s biggest crypto exchanges are controlled by a single individual or company — usually their founders. None currently adheres to the FSC’s proposed rules.
Song Chi-hyung, co-founder of Dunamu, the operator of the market-leading Upbit exchange, owns around 26% of Dunamu’s shares. This could soon change if the internet giant Naver gains regulatory approval to complete a share-swap deal that would see it take control of 100% of Dunamu’s shares.
The picture is similar elsewhere, with the gaming giant Nexon owning over 60% of Korbit’s shares, and Binance controlling over 67% of GOPAX’s shares.
Coinone founder Cha Myung-hoon, meanwhile, owns some 53% of his exchange. Subsidiaries of Com2uS Holdings, a South Korean gaming firm; holding a combined total of almost 39% of Coione’s shares.
Bithumb’s ownership, the only other domestic exchange with a full operating permit, remains a source of contention.
Officially, Bithumb is majority-owned by Bithumb Holdings, but the firms DAA, Vidente, and BTHMB each hold sizeable stakes of up to 31%.
South Korean media outlets and prosecutors have alleged that a controversial businessman named Kang Jong-hyun, the owner of Vidente, is Bithumb’s “de facto” owner.
Tim Alper is a News Correspondent at DL News. Got a tip? Email him at tdalper@dlnews.com.
