South Korea’s Financial Services Commission Chairman Lee Eog-weon on Wednesday called for a cap on the ownership stakes of major shareholders on digital asset exchanges. The country’s financial regulator seeks to cap ownership at 15-20%.
Lee’s remarks suggest that the country’s financial regulator is moving ahead with the initiative despite pushback from the Digital Asset eXchange Alliance (DAXA) of South Korea and the ruling Democratic Party of Korea. He argued that the initiative aims to align governance standards with the exchanges’ growing public role in the crypto industry.
The financial regulator’s proposal on controlling shareholders’ stakes is expected to be incorporated into the second phase of virtual asset legislation, the Digital Asset Basic Act. Lee stated that the existing Act on Reporting and Using Specified Financial Transaction Information and the Act on the Protection of Virtual Asset Users focus on anti-money laundering and investor protection.
The FSC’s chair revealed that the new legislation aims to serve as a comprehensive legal framework governing the entire crypto industry. He also pointed to the current system, which allows digital asset exchanges to operate under a notification system with a 3-year renewal requirement.
Lee believes that the shift to an authorization system would effectively grant local exchanges permanent operating status in South Korea. He argued that a higher status requires digital exchanges to adopt governance rules that align with their larger roles and responsibilities.
Lee also acknowledged that the initiative is part of South Korea’s broader effort to integrate crypto exchanges into the mainstream financial system. The FSC believes the initiative will reinforce accountability, transparency, and the public interest.
DAXA and Korea’s Democratic ruling party oppose FSC’s ownership cap initiative
DAXA previously opposed FSC’s initiative to cap major shareholders’ stakes in virtual asset exchanges at around 20%. Cryptopolitan reported that the joint council representing major local crypto exchanges, including Coinone and Upbit, warned that the proposal could hinder the development of Korea’s virtual asset industry.
Shareholders at Upbit’s operator, Dunamu, including Chair Song Chi-hyung and related parties, hold more than 28% of the firm’s shares. Coinone’s Founder Cha Myung-hoon holds roughly 53% of the company’s shares. FSC’s new law would force the crypto exchanges’ shareholders to offload a significant portion of their holdings.
The Democratic ruling party of South Korea also argued that similar ownership caps on shareholders’ stake in crypto exchanges are uncommon internationally. The party believes that the ownership caps could put South Korea out of sync with global regulatory trends.
Lee responded to the concerns raised, disclosing that he remains in close talks with the party. He argued that while there is broad agreement on the need for the initiative, ongoing discussions are underway over its scope and timing.
Lee maintained that the Digital Asset Basic Act is a major legislative endeavor. He revealed that there will be continued consultations with the National Assembly and relevant ministries to ensure the legislation moves forward without unnecessary delays.
Cryptopolitan previously reported that the FSC plans to allow more than 3,500 listed firms and professional investors to invest directly into crypto. The financial regulator will allow firms to invest up to 5% of their equity capital in digital assets.
Authorities also revealed that the FSC is in talks with lawmakers to establish a legislative proposal for the Framework Law on digital assets. The law is expected in the first quarter, with companies facing an annual deposit or investment ceiling capped at 5% of their initial capital.
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Source: https://www.cryptopolitan.com/south-koreas-fsc-supports-ownership-cap/
