South Korea Plans 20% Cap on Crypto Exchange Shareholder Stakes: Report

South Korea’s government and ruling party have reportedly agreed on a plan to cap the ownership stakes of major shareholders in domestic crypto exchanges at 20%.

The Democratic Party of Korea’s digital asset task force and the Financial Services Commission (FSC) agreed to set the maximum shareholding limit at 20% after discussions, according to a Wednesday report by local media outlet Herald Economy.

However, regulators may allow exceptions of up to 34% for new businesses through an enforcement decree. The threshold references the Commercial Act’s 33.3% veto threshold in general shareholders’ meetings, per the report.

Under the proposal, exchanges would reportedly have three years from the law’s enforcement to adjust their ownership structures. Smaller exchanges may receive an additional three-year grace period. Larger platforms like Upbit and Bithumb, which together control roughly 90% of the local market, would be required to reduce major shareholder stakes within the initial three-year period.

Related: Korea halts trading as key indexes drop 10% on Middle East crisis

Major Korean exchanges exceed proposed ownership cap

Current ownership levels across South Korea’s major exchanges exceed the proposed cap. Upbit chairman Song Chi-hyung holds about 25.52%, while Bithumb Holdings owns roughly 73.56% of Bithumb. Coinone chairman Cha Myung-hoon controls about 53.44%, Mirae Asset Consulting is set to hold around 92.06% of Korbit following an acquisition, and Binance owns about 67.45% of GOPAX.

The proposal, which has received some backing among regulators, faces a lengthy legislative process. A member of the National Assembly is expected to introduce the bill, though the sponsor has not yet been determined. Passage may prove challenging, as some lawmakers, including members of the ruling party, have raised concerns about restricting ownership in the sector.

An industry insider warned that the measure could have broader implications for competition. “This is unprecedented worldwide and has low global consistency. If it is excessively introduced, it could have serious negative effects such as limited competition, slowed innovation, and strengthened barriers to entry,” they reportedly told the outlet.

Related: South Korea orders cross-agency probe after repeated crypto custody failures

South Korea tightens crypto licensing rules

In late January, South Korea’s National Assembly approved changes to the country’s crypto licensing framework, introducing stricter entry requirements for virtual asset service providers (VASPs). The updated rules allow authorities to examine executives and major shareholders for a wider range of potential violations, including drug trafficking, tax evasion, fair-trade breaches and serious economic crimes.