What Is the Proposed Ownership Cap?

South Korea’s government and the ruling Democratic Party are discussing a plan to limit the ownership stakes of major shareholders in domestic crypto exchanges to 20%, according to a report by local outlet Herald Economy. The proposal emerged from discussions between the party’s digital asset task force and the Financial Services Commission (FSC).

Under the draft framework, the 20% threshold would apply to controlling shareholders of virtual asset trading platforms. Regulators may allow limited exceptions of up to 34% for new businesses through an enforcement decree. The higher threshold reflects the Commercial Act’s 33.3% veto threshold at shareholder meetings.

If the measure moves forward, exchanges would have three years after the law takes effect to adjust their ownership structures. Smaller exchanges may receive an additional three-year grace period, while the country’s largest platforms would be required to comply within the initial transition window.

Investor Takeaway

Which Exchanges Would Be Affected?

Current ownership structures across the country’s largest exchanges exceed the proposed cap by a wide margin. Upbit chairman Song Chi-hyung holds about 25.52% of the exchange’s parent company, while Bithumb Holdings controls roughly 73.56% of Bithumb.

Other major platforms also show concentrated ownership. Coinone chairman Cha Myung-hoon holds around 53.44%, Mirae Asset Consulting is expected to hold roughly 92.06% of Korbit following a recent acquisition, and Binance owns approximately 67.45% of GOPAX.

Upbit and Bithumb together account for roughly 90% of South Korea’s crypto trading market, meaning any ownership cap would have a direct impact on the country’s most influential platforms.

To comply with the proposed rules, controlling shareholders would likely need to reduce their holdings through share sales or ownership restructuring if the legislation is enacted.

How Likely Is the Proposal to Become Law?

The plan remains at the discussion stage and would still need to move through South Korea’s legislative process. A member of the National Assembly is expected to introduce the bill, though the specific sponsor has not yet been identified.

Passage is not guaranteed. Some lawmakers, including members of the ruling party, have raised concerns about imposing ownership limits on exchanges operating in a competitive technology sector.

An industry insider cited in the report warned that the policy could weaken competition and slow innovation if implemented too aggressively.

“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,” the source told the outlet.

Investor Takeaway

Ownership limits could reshape governance at major Korean exchanges if adopted, particularly for platforms with highly concentrated shareholder structures.

What Other Crypto Regulations Are Being Considered?

The ownership proposal arrives alongside a broader tightening of South Korea’s digital-asset regulatory framework. In late January, the National Assembly approved changes to the country’s licensing system for virtual asset service providers.

The updated framework expands background checks for executives and major shareholders. Authorities are now allowed to review involvement in offenses such as drug trafficking, tax evasion, fair-trade violations and other serious economic crimes when assessing licensing eligibility.

Additional legislative proposals are also under discussion. In February, Democratic Party lawmaker Kim Seung-won said he intends to introduce amendments to the Capital Market and Financial Investment Business Act and the Act on the Protection of Virtual Asset Users.

Those amendments would require individuals who provide investment advice or encourage trading in financial products or virtual assets to disclose their positions and potential conflicts of interest.

Taken together, the proposals reflect South Korea’s effort to build a tighter regulatory structure around the crypto industry while addressing concerns over governance, transparency, and market influence within large trading platforms.