Financial regulators' consideration of capping major shareholders' stakes in domestic cryptocurrency exchanges at 15-20% is sending ripples through the industry. If implemented, the regulation would force changes to founder-centric governance structures and could derail major business plans including mergers and acquisitions and initial public offerings.
According to financial industry sources on December 31, the governance structures of crypto exchanges have emerged as a key variable in market reorganization as regulators proposed limiting ownership concentration among major shareholders.
Dunamu, operator of Upbit, has Chairman Song Chi-hyung as its largest shareholder with a 25.52% stake. Bithumb's largest shareholder is Bithumb Holdings (73.56%), controlled by former Chairman Lee Jung-hoon. Coinone Chairman Cha Myung-hun holds 53.44% as the largest shareholder. While Korbit and Gopax underwent M&A deals that made NXC (53.44%) and Binance (67.45%) their respective largest shareholders, both exceed the 20% threshold.
"There is a possibility that authorities will require major shareholders to reduce their stakes to 15-20% with a grace period of 5-10 years," said Park Sang-jin, senior foreign attorney at law firm SL Partners. "Failure to comply could result in being barred from business operations."
The key concern is that ownership limits could halt the accelerating exchange consolidation. Dunamu is proceeding with a comprehensive stock swap to make itself a subsidiary of Naver through Naver Financial. The combination is expected to create a mega fintech company with a market capitalization of around 20 trillion won ($14 billion).
"The entire stock swap structure may need to be redesigned," an industry official said. "Even after the merger, ownership dispersion could weaken the momentum for new business initiatives."
Mirae Asset Group's pursuit of Korbit has also become more uncertain. Mirae Asset recently signed a memorandum of understanding to acquire most of the stakes held by NXC and SK Planet, Korbit's major shareholders.
"If you can't secure management control after investing more than 100 billion won, there may be virtually no reason to proceed with the acquisition," another industry official said. "This will affect various deals taking place amid market expansion."
Market reactions are mixed. An official at a law firm who requested anonymity said the discussion on ownership limits "is a good opportunity to debate what quasi-public characteristics cryptocurrency exchanges have in Korea."
Exchanges are pushing back strongly. There are concerns that excessive ownership regulations applied only to domestic operators could accelerate foreign operators' entry into the Korean market by exploiting regulatory gaps. The argument is that while responsible major shareholders' capital investment would shrink and weaken domestic exchange competitiveness, foreign capital's influence could actually grow.
"If stakes are fragmented and responsible major shareholders disappear, accountability could become even more unclear when incidents occur," a crypto exchange official said. "This could simultaneously dampen capital inflows and innovation."
Some suggest voting rights restrictions would be preferable to ownership limits.
"Direct government intervention in ownership structure is excessive regulation," a crypto exchange official said. "Behavioral regulations on major shareholders alone can sufficiently curb abuse of control."
Hwang Seok-jin, professor at Dongguk University's Graduate School of Information Security, said, "A phased approach such as voting rights restrictions or behavioral regulations may be more realistic than forcing immediate ownership restructuring."
Financial authorities maintain that no final decision has been made. "Nothing has been finalized, including the ownership limits," an official said.