South Korean Crypto Exchanges Slam Government's Proposed Ownership Cap

South Korean crypto exchanges have criticized the government's proposal to cap major shareholder stakes in digital asset platforms at 15-20%.

The Digital Asset Exchange Alliance (DAXA) warned that such measures could "significantly impede" the growth of the digital asset industry and market. DAXA represents South Korea's five major cryptocurrency exchanges — Upbit, Bithumb, Korbit, Coinone, and Gopax according to reports.

Industry leaders argue that the cap could dilute accountability for user assets and undermine the foundation of the emerging sector. They emphasized that major shareholders currently bear ultimate responsibility for managing and securing user assets.

Why Did This Happen?

South Korea's Financial Services Commission (FSC) proposed the cap to address potential governance risks from concentrated ownership. The move aims to prevent market monopolization and enhance consumer protection. The proposal is part of broader efforts to finalize the Digital Asset Basic Act, a comprehensive regulatory framework for digital assets.

The FSC reportedly introduced the measure following two major ownership shakeups in the crypto sector. Upbit's merger with Naver Financial and potential acquisition talks for Korbit highlight the evolving landscape.

How Did Markets React?

DAXA expressed concerns that the cap could lead to a loss of global competitiveness. If investment in domestic exchanges is not sustained, it could result in users migrating to overseas platforms. This shift could weaken South Korea's position in the global crypto market.

The proposed cap also creates uncertainty for startups and emerging industries. DAXA warned that it could stifle entrepreneurship and investment. This concern is shared by industry analysts who monitor the broader implications for innovation and market growth.

What Are Analysts Watching Next?

Industry observers are closely watching the finalization of the Digital Asset Basic Act, expected by the first quarter of this year. The legislation will formalize rules for initiatives launched in 2025, including Korean won-pegged stablecoins and spot crypto ETFs.

Analysts also highlight the potential for increased liquidity if the ban on corporate crypto investments is lifted. South Korean authorities are reportedly proposing a 5% cap on corporate investments in digital assets. This move could unlock significant liquidity for the crypto market.

The regulatory environment is evolving rapidly. South Korea is balancing innovation with risk management, aiming to align with global standards while addressing domestic concerns. The ultimate resolution of the ownership cap debate will influence the country's position in the international digital asset ecosystem.