South Korea proposes a 20% ownership cap for crypto exchanges

New governance rules for the cryptocurrency industry

The South Korean government has officially proposed a 20% cap on equity ownership in virtual asset service providers (VASPs) — including major cryptocurrency exchanges — as part of a comprehensive revision to the Act on Reporting and Use of Specific Financial Transaction Information (the main legal framework for cryptocurrencies). Current ownership situation (Major exchanges):

• Upbit (Dunamu): Dunamu is majority-owned by Kakao ( ~38–40% indirectly through subsidiaries ) → may need restructuring.

• Bithumb: Controlling stake held by Vidente and its affiliates ( ~34–36% ) → under investigation; application of limits would necessitate significant divestment.

• Coinone & Korbit: More decentralized ownership, likely to be compliant or nearly compliant with regulations.

If enacted, this regulation would force some platforms to dilute the shares of their founding/controlling shareholders — potentially opening the door to more institutional or foreign investment.

This policy is designed to reduce the concentration of control in trading platforms and strengthen corporate governance standards in the country's rapidly growing digital asset sector.

Authorities believe that restricting controlling shareholders could improve transparency, reduce systemic risk, and help cryptocurrency exchanges better align with governance standards applied to traditional financial institutions.

Regulators are concerned about the concentration of ownership

Cryptocurrency exchanges serve as the core infrastructure of the digital asset market, processing billions of dollars in trading activity and holding vast amounts of user funds. With control concentrated in a few owners, regulators worry that this could create vulnerabilities such as:

• Conflict of interest between management and users.

• Weak internal oversight structure

• Increased risk of market manipulation.

• Limiting accountability for regulators and minority investors.

By imposing a 20% ownership cap, the government aims to encourage broader shareholder distribution and stronger board-level oversight.

South Korea's significant influence

South Korea remains one of the world's most dynamic retail cryptocurrency markets. Domestic exchanges such as Upbit, Bithumb, and Coinone dominate local trading volume and play a central role in the country's digital asset ecosystem.

Sometimes, strong retail demand even creates a price difference between the Korean market and global exchanges, a phenomenon widely known as the "Kimchi arbitrage."

Given the scale of retail investor participation, South Korean regulators have historically taken a cautious and proactive stance in monitoring the cryptocurrency market.

Our review

South Korea's proposal reflects a broader global trend in which regulators are increasingly viewing cryptocurrency exchanges as critical, systemic financial infrastructure rather than loosely regulated technology platforms.

Many countries are imposing governance, capital, and transparency requirements similar to those applied to stock exchanges and brokerage firms. This shift marks the gradual maturation of the cryptocurrency industry as it increasingly integrates with traditional financial markets.

Disclaimer: The information presented in this article is the author's personal opinion in the field of cryptocurrency. This is not financial or investment advice. All investment decisions should be based on careful consideration of your personal portfolio and risk tolerance. The views expressed in this article do not represent the official stance of the platform. We recommend that readers conduct their own research and consult with experts before making any investment decisions.

Compiled and analyzed by HCCVenture

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