South Korea’s Financial Services Commission Proposes 20% Stake Cap for Major Shareholders in Cryptocurrency Exchanges Amid Legal Concerns

South Korea’s Financial Services Commission Pushes for 20% Cap on Crypto Exchange Shareholdings Amid Legal Concerns

SEOUL, South Korea — In a bold move to regulate the burgeoning cryptocurrency sector, South Korea’s Financial Services Commission (FSC) has announced plans to impose a 20% cap on holdings by major shareholders of cryptocurrency exchanges. This initiative comes despite the commission’s admission of not conducting any legal reviews or advisory work related to the matter in the past five years.

The FSC’s proposal is part of the government’s draft Digital Asset Basic Act, which aims to establish a regulatory framework for virtual asset businesses. While the commission is advocating for a strict 20% ownership limit, it is also considering an exception that would allow major shareholders to hold up to 34% if they meet specific conditions.

In a recent disclosure to Rep. Park Min-kyu of the National Assembly’s Political Affairs Committee, the FSC revealed a lack of internal or external legal reviews or advisory records related to cryptocurrency regulations. This revelation raises questions about the commission’s preparedness to implement such significant changes in the regulatory landscape.

The National Assembly Research Service has voiced concerns that enforcing the proposed ownership limits could infringe on constitutional property rights, freedom of occupation, and business activity. Additionally, the principle barring retroactive legislation could pose legal challenges for existing major shareholders who may be required to divest their holdings or accept restrictions on their voting rights.

As the government prepares to submit the draft of the Digital Asset Basic Act to Rep. Yoo Dong-soo, the chair of the National Assembly’s Political Affairs Committee, the issue of curbing major shareholders’ stakes in crypto exchanges has emerged as a focal point in the legislative discussions.

The FSC has yet to finalize the details of the ownership cap and the associated voting rights restrictions, leaving stakeholders in the cryptocurrency market anxiously awaiting clarity on the proposed regulations.

As South Korea continues to navigate the complexities of cryptocurrency regulation, the FSC’s push for a stake cap highlights the ongoing tension between fostering innovation in the digital asset space and ensuring consumer protection and market integrity. The coming weeks will be crucial as lawmakers deliberate on the implications of these proposed changes.