Seoul Strips Exchange Power As Infrastructure Mandate Looms

Speaking on 28 Jan, Financial Services Commission (FSC) Chairman Lee Eog-weon revealed plans to limit controlling shareholder stakes to between 15% and 20%. The move signals a transition for platforms like Upbit and Coinone from private startups into regulated market infrastructure. This shift aligns with recent internal reviews regarding ownership caps as the state seeks to formalise the sector under a public mandate.

Dilute and rule

Under the proposed second phase of the Digital Asset Basic Act, the FSC intends to move exchanges from a simple notification regime to a formal authorisation model. This higher status attracts significantly higher standards, with Lee warning that concentrated ownership increases conflicts of interest and weakens market integrity. The regulator is drawing a direct parallel to the ownership limits already enforced upon traditional securities exchanges and alternative trading venues.

If enacted, the rule will force a meaningful dilution of power at the country’s largest incumbents. At Dunamu, the operator of Upbit, Chairman Song Chi-hyung and related parties reportedly hold more than 28% of the company. The situation is even more extreme at Coinone, where founder Cha Myung-hoon controls approximately 53% and is reportedly in discussions with Coinbase regarding a potential stake sale. While the domestic industry group DAXA argues that such caps will deter long-term investment, the state appears uninterested in the complaints of billionaires whose fiefdoms it intends to democratise.

Exchanges as state bailiffs

This regulatory tightening arrives alongside a significant shift in the judicial treatment of digital assets. The Supreme Court of Korea recently ruled that bitcoin held on centralised platforms is subject to direct seizure, removing any legal ambiguity regarding whether exchange-custodied crypto can be frozen or confiscated. The strategy remains transparent: reduce key-person control while simultaneously treating exchanges as accountable intermediaries that can be compelled to enforce state warrants, freezes and investor protection standards.

Seoul is effectively telling the industry that if crypto exchanges are to become permanent fixtures in the financial system, they must be governed like critical infrastructure rather than founder-led experiments. For the institutional Strategy players, this represents a double-edged sword. It provides the long-term operating status and legitimacy required for mass adoption, yet it strips away the autonomy that defined the early era of the industry. The net is tightening, and in South Korea, the state is the only entity allowed to hold the strings.