South Korea Backs Ownership Limits for Crypto Exchanges

South Korea’s Financial Services Commission (FSC) is endorsing ownership limits on crypto exchanges, positioning them as public infrastructure. This regulatory shift aims to curb concentrated power in the digital asset sector, impacting exchanges and investors.

Regulatory Shift: Ownership Caps on Crypto Exchanges

The head of South Korea’s FSC, Lee Eog-weon, has publicly supported ownership restrictions for crypto exchanges. Under the proposed Digital Asset Basic Act, significant shareholders would face limits of 15% to 20%. This move redefines exchanges as entities providing public services, akin to securities markets, and seeks to prevent concentrated ownership from threatening market integrity.

Implications for the Crypto Industry

The proposed caps could force major exchanges like Upbit and Coinone to reorganize. Dunamu, Upbit’s operator, and Coinone’s founder currently hold substantial shares, well above the proposed limits. This regulatory change could disrupt mergers and partnerships within the industry.

Industry Reactions and Potential Impact

Domestic exchanges express concerns that these caps could dismantle existing systems. The proposed legislation’s impact extends to potential disruptions in ongoing mergers, such as Naver’s with Dunamu. Despite resistance, the FSC’s push for stronger governance reflects a broader trend towards aligning crypto regulations with traditional financial markets.

Legislative Timeline and Future Prospects

Lawmakers aim to pass the Digital Asset Basic Act by February 17, before the Lunar New Year. However, disagreements over shareholder caps persist, requiring further review. If enacted, the law would extend anti-money laundering rules to smaller transfers, affecting platforms with large user bases.

Investor Takeaway

South Korea’s regulatory developments highlight the growing trend of integrating crypto into mainstream financial systems. This shift could set a precedent for other countries evaluating crypto regulation.