PROD News Article 1

Government moves to cap controlling shareholders’ stakes…13 years after the launch of domestic exchanges

Shift from a reporting regime to a licensing regime

Public-interest functions likely to be significantly strengthened

De facto easing of the separation of finance and industry

Encourage equity participation by incumbent financial institutions

Direct hit to Dunamu, Bithumb and others

Also affects exchange M&A

The government is pushing a plan to cap controlling shareholders’ stakes in domestic crypto-asset exchanges, where annual trading volume exceeds 1,000 trillion won. Thirteen years after Korea’s first crypto exchange was established, authorities are embarking on a sweeping overhaul of governance structures. With the number of exchange users reaching 11 million, the aim is to strengthen public-interest functions through “dispersed ownership.” With all five major domestic exchanges in scope, the measures are also expected to become a variable for big-ticket deals by Naver and Mirae Asset, which are separately pursuing Dunamu and the acquisition of Korbit.

Cap controlling stakes at up to 20%

According to the industry on the 31st, a proposal to cap controlling shareholders’ stakes in crypto-asset exchanges at 15–20% is being strongly considered in the Digital Asset Framework Act being pursued by the Financial Services Commission (FSC). The idea is to redefine crypto exchanges as public infrastructure comparable to alternative trading systems (ATS). Under the current Capital Markets Act, an ATS may not own more than 15% of voting shares, including those held by related parties. Financial companies and public funds may exceed 15% only as an exception when approved by the FSC. Nextrade is owned in equal 6.64% stakes by seven securities firms, including Korea Investment & Securities and Mirae Asset.

The government’s move to revamp crypto-exchange governance is seen as an attempt to fix the current structure in which a small number of founders or shareholders wield excessive influence over overall exchange operations. It is also designed to break the market structure dominated by the top two players, Upbit and Bithumb, and to foster an ecosystem in which diverse operators can enter and compete fairly.

To this end, a shift from the current reporting system to a licensing regime is being discussed as a key pillar. Until now, oversight and control have relied on indirect management through banks that provide real-name accounts, without direct licensing or governance reviews by financial authorities. Once the law is enacted, exchanges are expected to be able to operate only after obtaining a business license from financial regulators. In the process, fit-and-proper reviews of controlling shareholders and dispersed-ownership requirements are expected to serve as key yardsticks.

The principle of “separation of finance and industry,” which has limited the combination of traditional finance and crypto businesses, is likely to be eased. In the course of dispersing ownership, it would be difficult to ensure market stability and effective supervision without the participation of regulated financial institutions. If combined with industry-boosting measures expected to be included in the bill, it could also help upgrade Korea’s retail-centric digital-asset market into areas such as institutional investment, real-world asset tokenization (RWA), and security token offerings (STO). A financial-industry official said, “Exchanges have grown into adults in size, but their governance and user-protection systems are still at a child’s level,” adding, “This is the time for fundamental change.”

Stake reductions likely unavoidable

To continue operating after the law takes effect, the largest shareholders of Korea’s five won-denominated crypto exchanges will need to sell down their stakes. At Dunamu, which runs Upbit, Chairman Song Chi-hyung is the largest shareholder with a 25.52% stake. At Bithumb, Bithumb Holdings owns 73.56%. At Coinone, CEO Cha Myung-hoon, the founder, holds 53.44% including stakes held through his personal company, while at Korbit, NXC holds 60.5%. In the case of Gopax, the foreign exchange Binance holds 67.45%. For each exchange, there are also multiple major shareholders other than the largest shareholder who hold stakes of 20% or more. Stake reductions by these holders appear unavoidable.

As a result, there is speculation that the plans of Naver and Mirae Asset—separately seeking to bring Dunamu and Korbit into their fold—could face immediate setbacks. Naver said it would make Dunamu a second-tier subsidiary through a share swap between its subsidiary Naver Pay and Dunamu. Because the structure would have Naver Pay owning 100% of Dunamu, it would run afoul of the controlling-shareholder cap. Accordingly, the equity structure will likely need to be redesigned.

The same applies to Mirae Asset, which is planning to acquire Korbit. Mirae Asset signed a memorandum of understanding (MOU) to acquire stakes held by Korbit’s largest shareholder NXC and second-largest shareholder SK Planet (31.5%). However, if such regulations materialize, Mirae Asset is expected to face substantial constraints in taking management control of Korbit. A financial-industry official said, “A sufficient grace period can be granted during the transition to a licensing regime,” adding, “Stake adjustments are also likely to proceed in stages accordingly.”

Cho Mi-hyun / Seo Hyung-kyo, reporters mwise@hankyung.com