Extracted from exchange disclosures: PROD news article

Government pushes to cap controlling shareholders’ stakes…13 years after domestic exchanges were first established

Shift from a reporting regime to a licensing regime

Public-interest function likely to be significantly strengthened

De facto easing of the separation of finance and industry principle

Move to draw participation from existing financial institutions

Direct hit to Dunamu, Bithumb and others

Spillover to exchange M&A as well

The government is moving to restrict controlling shareholders’ stakes in domestic virtual-asset exchanges, whose transaction volume exceeds 1,000 trillion won. It marks a sweeping overhaul of governance structures 13 years after virtual-asset exchanges were first established in Korea. With the number of exchange users reaching 11 million, the aim is to strengthen the public-interest function through “dispersed ownership.” With all of the country’s top five exchanges within scope, the measures are also expected to become a variable in big-ticket deals by Naver and Mirae Asset, which are respectively pursuing Dunamu and Korbit acquisitions.

Cap controlling shareholders’ stakes at up to 20%

According to the industry on the 31st, a provision to limit controlling shareholders’ stakes in virtual-asset exchanges to 15–20% is being strongly considered in the Digital Asset Basic Act being pushed by the Financial Services Commission. The idea is to redefine virtual-asset exchanges as public infrastructure on a par with alternative trading systems (ATS). Under the current Capital Markets Act, an ATS—together with related parties—may not own more than 15% of voting shares. Financial companies and publicly offered funds may exceed 15% only as an exception, subject to approval 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 push to overhaul exchange governance is seen as an effort to fix the current structure in which a small number of founders or shareholders wield outsized influence over overall operations. Another objective is to break the dominance of the top two players—Upbit and Bithumb—and foster an ecosystem in which various operators can enter and compete fairly.

A core pillar being discussed is converting the current reporting-based regime into a licensing regime. Until now, authorities have relied on indirect management and control via banks that provide real-name accounts, without direct licensing or governance reviews by regulators. Once the law is enacted, exchanges will likely need a business license from financial authorities to operate. In that process, controlling shareholder fitness reviews and ownership-dispersion requirements are expected to serve as key yardsticks.

The “separation of finance and industry” principle, which has limited the combination of traditional finance and virtual-asset businesses, is likely to be eased. Without participation by regulated financial institutions during the ownership-dispersion process, it would be difficult to ensure market stability and effective oversight. If combined with industry-support measures expected to be included in the bill, the primarily retail-driven domestic digital-asset market could also be upgraded into areas such as institutional investment, real-world asset tokenization (RWA), and security tokens (STO). A finance-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-based virtual-asset exchanges will need to sell down their stakes. At Dunamu, which operates 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 via a personal company, while at Korbit, NXC controls 60.5%. For GOPAX, the overseas exchange Binance holds 67.45%. Many exchanges also have multiple major shareholders other than the largest shareholder who own stakes of 20% or more. Their stake reductions appear unavoidable.

This, in turn, raises the possibility of immediate disruptions to the plans of Naver and Mirae Asset, which are respectively seeking to bring Dunamu and Korbit into their groups. Naver said it would make Dunamu a second-tier subsidiary through a stake swap between its unit Naver Pay and Dunamu. Because the structure would have Naver Pay holding 100% of Dunamu, it would run afoul of the controlling-shareholder stake cap. As a result, the ownership structure is likely to 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 the regulations materialize, Mirae Asset is expected to face significant constraints in acquiring management control of Korbit. A finance-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