South Korea Weighs 20% Cap on Crypto Exchange Controlling Stakes, With 34% Exception

• The government is pushing in the Digital Asset Basic Act to cap controlling shareholders’ stakes at 20% in cryptocurrency exchanges as a rule, while allowing holdings of up to 34% for operators that meet innovation-related requirements.
• The proposal includes limits on voting rights and orders to dispose of excess holdings for shares above the ceiling, while some ruling party members have also suggested a looser alternative that would limit only voting rights to 20% instead of ownership stakes.
• If the bill passes in line with the government draft, Dunamu would be able to maintain its current stake if the 34% exception is granted, while Bithumb would face unavoidable adjustments to its largest shareholder’s stake above 70%, meaning the impact would differ sharply by exchange.

Forecast Trend Report by Period

Outline Emerges for Digital Asset Basic Act

20% Stake Cap as a Rule

Ceiling Could Rise for Operators Meeting Innovation Criteria

Voting Rights Curbs for Excess Holdings

Likely Retreat on Ban on Third Consecutive Terms for Finance CEOs

The South Korean government’s outline for the Digital Asset Basic Act, which has been stalled in the National Assembly for more than a year, is beginning to take shape. The proposal would cap controlling shareholders’ stakes in cryptocurrency exchanges at 20% as a rule, while allowing holdings of as much as 34% for operators that meet conditions including innovation. It would also restrict voting rights on shares above the limit and order the disposal of excess holdings. Still, passage this year remains uncertain as some members of the ruling party have proposed a looser alternative that would curb voting rights rather than ownership stakes.

To Be Introduced as a Lawmaker-Proposed Bill Next Month

According to the National Assembly and other officials on Aug. 26, the Financial Services Commission plans to submit the government’s draft of the Digital Asset Basic Act as early as early September to Rep. Yoo Dong-su of the Democratic Party, chair of the National Assembly’s Political Affairs Committee. The measure would be South Korea’s first framework law for virtual assets, setting out categories for crypto businesses and rules for stablecoins. Because multiple bills have already been proposed, the government draft is expected to serve as the main reference point. The lawmaker who will formally introduce the bill plans to finalize that decision once the government draft is ready.

The centerpiece of the proposal is a cap on controlling shareholders’ stakes in crypto exchanges. If enacted, the law would shift exchanges from a registration system to a licensing regime. The government views exchanges as core infrastructure for virtual-asset trading and sees a need to ease ownership structures that concentrate control in the hands of a small number of major shareholders.

A 20% ceiling on exchange stakes held by controlling shareholders is the leading option. Lawmakers are also expected to discuss an exception that would allow holdings of as much as 34% for operators that meet certain conditions, including the innovativeness of their business models. The aim is to avoid uniformly forcing all operators down to 20% and instead allow exceptions based on a company’s characteristics and competitiveness.

Restrictions on voting rights are also under review alongside the ownership cap. Under the proposal, a controlling shareholder would be barred from exercising voting rights on shares held above the legal limit. If those excess shares are not disposed of within a set period, financial authorities would be able to order their sale. A National Assembly official said the measure borrows from ownership-dispersion standards under the Capital Markets Act, adding that details would be adjusted during parliamentary deliberations.

Timing of Passage Remains Unclear

The proposed cap on controlling-shareholder stakes has been one of the most contentious issues in discussions over the Digital Asset Basic Act. Forcing existing major shareholders of exchanges to sell down their holdings could trigger controversy over property rights. It would also bring management-control risks into sharper focus. That has been the biggest reason the government draft, originally due last year, was delayed.

If the bill passes in its current form, the impact would vary sharply by exchange. At Dunamu, operator of Upbit, Chairman Song Chi-hyung holds a stake in the 25% range, meaning he could keep his current holding if the 34% exception is granted. At Bithumb, by contrast, the largest shareholder holds more than 70%, making a substantial ownership adjustment unavoidable even if the 34% exception is applied. A ruling party official said it has not yet been decided how much of the government draft the party will accept. With many members of the Political Affairs Committee replaced in the latter half of the 22nd National Assembly, discussions could take longer. Another variable is a proposal from some ruling party lawmakers to cap voting rights at 20% instead of limiting ownership stakes.

Deliberations on a bill to bar financial holding company chairmen from serving a third consecutive term, which had been cited as a priority item for the Political Affairs Committee, may also take longer than initially expected. Momentum has weakened for putting a direct limit into law. Pushback from the financial industry has intensified, and the legislative drive centered on the presidential office appears to have cooled. The Financial Services Commission is also understood to be leaning toward leaving the matter to the National Assembly rather than presenting a separate government proposal.

Lee Si-eun, Cho Mi-hyun and Ha Ji-eun, Hankyung.com reporters see@hankyung.com

Source: en.bloomingbit.io