The South Korean government and ruling party reportedly reached a compromise requiring major shareholders in cryptocurrency exchanges to reduce their stakes to 20%, part of the Digital Asset Basic Act Phase 2 legislation that would convert exchanges from a notification regime to a formal licensing system.
What the Bill Requires
The 20% cap applies to major shareholders. Owners holding above that threshold would be required to divest to reach compliance. The target is the ownership concentration at Upbit and Bithumb, which together hold approximately 90% of South Korea’s domestic crypto trading market.
The Financial Services Commission framed the rationale in terms of infrastructure governance. As exchanges become core financial infrastructure, the FSC argues that dispersed ownership structures, similar to how traditional securities exchanges like the Korea Stock Exchange are governed, are necessary to prevent conflicts of interest. An exchange where one founder controls 73% of equity has different governance dynamics than a publicly dispersed exchange, the argument goes.
The compromise includes an exception mechanism. The FSC may issue enforcement decrees allowing stakes of up to 34% in specific cases. That exception creates a practical ceiling of 34% rather than 20% for shareholders who qualify. The difference between the headline 20% cap and the 34% exception ceiling is not a minor detail.
Who Gets Forced to Sell
The numbers are not ambiguous for the exchanges named.
Bithumb Holdings holds approximately 73.5% of Bithumb. A 20% cap would require selling more than 50 percentage points of equity. Even with the 34% exception, the required divestment exceeds half of current ownership. Finding buyers for that volume of shares in a Korean exchange under regulatory pressure is not a straightforward transaction.
Song Chi-hyung holds approximately 25 to 28% of Upbit’s parent company Dunamu. The divestment required to reach 20% is 5 to 8 percentage points, significantly smaller in relative terms. The exception mechanism at 34% would not require any divestment from Song’s position at all.
Cha Myung-hoon holds approximately 53 to 54% of Coinone. A 20% cap would require selling more than 33 percentage points. The 34% exception ceiling still requires roughly 20 percentage points of divestment.
The three-year compliance window applies to major exchanges, with smaller platforms like Coinone, Korbit, and GOPAX potentially receiving up to six years.
The Pushback
The objections come from multiple directions and are not purely self-interested.
The constitutional argument is that forced divestment of private equity at a government-set valuation timeline is a property rights issue. Whether Korean courts would accept a challenge on those grounds is a separate legal question from whether the argument has merit. It has sufficient merit that legal experts, not just founders, are raising it.
The governance stability argument has real-world precedent. Founder-controlled companies in the technology sector routinely make faster, more coherent decisions than ownership-dispersed companies managed by professional executives accountable to distributed shareholders. Whether that trade-off favors dispersed ownership for exchange infrastructure is a legitimate policy debate, not an obvious conclusion.
The regulatory arbitrage concern is concrete. Singapore, Japan, and the UAE have developed crypto regulatory frameworks that are competitive with South Korea’s without imposing ownership caps. A founder who is forced to sell a controlling stake under Korean law has an incentive to relocate the exchange’s incorporation and operations. Whether that threat is credible or rhetorical depends on how much of Upbit’s or Bithumb’s value is tied to Korean users specifically.
The Broader Context
South Korea is one of the world’s highest-volume crypto markets relative to GDP. The retail participation rate is unusually high by global standards. The Digital Asset Basic Act Phase 2 represents a transition from treating exchanges as simple service providers to treating them as public financial infrastructure, with the regulatory obligations that classification implies.
That transition is happening globally. The US CLARITY Act, MiCA in Europe, the UK’s digital asset regime, Australia’s AFSL framework, all covered this week, are different expressions of the same underlying shift. South Korea’s version includes an ownership concentration requirement that most other frameworks do not. Whether that specific provision survives constitutional challenge and political negotiation is the open question.
