South Korea Considers Ownership Caps for Crypto Exchanges Amid Broader Regulatory Push

South Korea's financial regulator is considering limits on how much control major shareholders can hold in virtual asset exchanges, a move that could require leading platforms such as Upbit and Coinone to reduce existing stakes.

Financial Services Commission (FSC) Chairman Lee Eog-weon said the proposal aims to align governance standards with the increasingly public role played by crypto exchanges. The FSC is reportedly reviewing a cap of around 15% to 20% on controlling shareholders, which may be included in the planned Digital Asset Basic Act — regarded as the second phase of South Korea's virtual asset legislation.

Lee noted that once exchanges operate under an authorization system, they would effectively gain permanent operating status. "The proposed shift to an authorization system would effectively grant exchanges permanent operating status," he said, adding that this would require governance structures more comparable to public infrastructure than private companies. He warned that "excessive concentration of ownership could increase the risk of conflicts of interest and undermine market integrity."

The proposal comes as South Korea expands regulation of its crypto sector. Authorities are preparing to extend the so-called Travel Rule to virtual asset transfers below $680, requiring exchanges to collect and share sender and recipient information for smaller transactions. This would build on the Virtual Asset Users Protection Act, which took effect in July 2025 and prohibits insider trading, market manipulation, and other illegal virtual asset activities.

Lee said existing laws — including the Act on Reporting and Using Specified Financial Transaction Information and the Act on the Protection of Virtual Asset Users — have primarily focused on anti-money laundering and investor protection. He added that securities exchanges and alternative trading systems already face similar ownership restrictions, suggesting crypto platforms should follow comparable standards as they become integrated into the mainstream financial system.

Industry participants, however, have raised concerns. A joint council representing domestic exchanges such as Upbit, Bithumb, and Coinone has warned that ownership caps could hinder the growth of South Korea's digital asset industry. According to available information, Upbit chair Song Chi-hyung and related parties hold more than 28% of the exchange, while Coinone founder Cha Myung-hoon controls about 53%.

Despite opposition, Lee indicated that the FSC intends to continue pushing the proposal forward. "Consultations with the National Assembly and relevant ministries will continue to ensure the bill moves forward without unnecessary delays," he said.

If adopted, the ownership cap would mark a significant step in South Korea's effort to increase accountability, transparency, and public oversight in the crypto exchange sector.