In a proposal likely to rile South Korea’s digital asset players, regulators have put the country’s four largest exchanges on notice for ownership shakeups that would limit major shareholders’ to between 15% and 20%.
The governance guardrails are part of the rollout of Phase 2 of the Basic Digital Asset Act legislation that also covers issuance requirements and market structure. The first phase, which came into effect in July 2024, focused on , basic operations and investor protections.
Stablecoin stalemate
Earlier in the week, Korean media reported about regulatory disagreements over who can issue stablecoins that threatened to impede the framework set up to govern crypto trading. The Bank of Korea is pushing for a rule that allows only entities with a minimum of 51% ownership by licensed banks to issue won-pegged stablecoins.
The latest regulatory salvo puts the country’s four dominant under the gun: Upbit, Bitthumb, Coinone and Korbit. This is based on the definition of exchanges with 11mn users as “core infrastructure” for distributing digital assets, South Korean media outlet KBS reported, citing documents it obtained from the Financial Services Commission's National Assembly report.
Too concentrated
"There is an issue where a small number of founders and shareholders exert excessive control over the overall operation of exchanges," the FSC report said, adding that there are “calls for reforming the ownership structure, which allows for significant operating profits, such as fees, to be concentrated in the hands of specific individuals."
The FSC is looking for guidance from the Capital Markets Act, which prohibits alternative exchanges, including related parties from owning more than 15% of voting shares. The watchdog’s proposal would “limit the ownership of major shareholders to between 15% and 20%,” the South Korean media outlet said.
Merger complications
The news could complicate life for Dunamu, which operates the largest crypto exchange Upbit, and had agreed in November to be acquired by Naver Financial in a share swap deal. Dunamu Chairman Song Chi-hyung currently holds a 25% stake, and if the government's proposal is implemented as is, he would be forced to sell up to 10% of his shares, KBS reported.
Also caught in the crosshairs is Bithumb, which together with Upbit effectively form a duopoly, with control of more than 95% of all and . Bithumb Holdings Co., Ltd. holds a 73% stake in Bithumb, and would likely need to sell down its stake, “potentially jeopardizing its governance structure”, according to the media outlet.
Korbit fined
Much farther down in the rankings, Coinone, with an estimated 1.8% of the South Korean market share, is owned 54% by Chairman Cha Myung-hoon. Fourth-ranked Korbit, with about 0.5% of market share rounds out the list. It is reportedly the target of financial giant Mirae Asset Group, which is eyeing a controlling stake for between 100bn won ($70mn) and 140bn won ($98mn), according to a report by Chosun Daily.
Separately, Korbit was fined 2.73bn won ($1.9mn) by the country's regulator for customer verification breaches.and violations of trading restrictions, an announcement from the FSC said.
The Korea Financial Intelligence Unit, an arm of the FSC, had conducted an on-site inspection on Korbit conducted in October 2024 to review anti-money laundering controls at domestic crypto exchanges.
