Hello, I am Jun Ji-hye, a reporter at The Korea Times. I primarily cover financial authorities and write articles on a wide range of topics related to finance and capital markets. If you have any information to share, feel free to email me at jjh@koreatimes.co.kr, and I will review it carefully. I am committed to always doing my best to communicate with readers through high-quality articles.
Will gov't push ahead with crypto exchange ownership cap despite constitutional concerns?
A display board shows the price of bitcoin at the Upbit customer center in Seoul's Gangnam District, Tuesday. Newsis
By Jun Ji-hye
Assembly's research body warns regulation may breach property rights
Attention is focusing on the fate of the government’s plan to cap major shareholders’ stakes in virtual asset exchanges at 20 percent after the National Assembly’s research body warned that the measure may be unconstitutional, lawmakers and industry officials said Thursday.
A policy consultation between the Financial Services Commission (FSC) and the ruling Democratic Party of Korea (DPK), originally scheduled for Thursday morning to finalize the proposed regulation, was postponed. Authorities said the delay was intended to allow financial authorities to prioritize market stabilization efforts as volatility in local equity and currency markets surged amid escalating tensions in the Middle East.
The session had been expected to finalize a comprehensive bill that would impose a 20 percent ceiling on major shareholders of virtual asset exchanges and introduce a regulatory framework for stablecoins under the tentatively titled Digital Asset Basic Act.
The FSC, the country’s top financial regulator, has maintained that exchange ownership should be capped at 15 to 20 percent, mirroring the rules governing alternative trading systems under the Capital Markets Act.
However, some DPK officials have urged a more cautious approach, prompting the regulator to put forward a revised proposal that would grant a three-year grace period before the cap takes effect and to consider applying differentiated ownership limits based on an exchange’s market share.
Even with a grace period, industry players say they are taken aback by what they view as unprecedented state intervention, as the proposed rule would compel privately owned virtual asset exchanges to dilute their ownership structures.
“Key M&A transactions in the sector, such as a share swap between Dunamu and Naver Financial, Mirae Asset Financial Group’s planned acquisition of Korbit and Binance’s purchase of Gopax, could be disrupted under the new cap,” a cryptocurrency industry official said.
Adding to the uncertainty, the National Assembly Research Service has warned that the ownership restriction may run afoul of the Constitution.
In a report provided to Rep. Kim Sang-hoon of the main opposition People Power Party, the research body said the measure could infringe upon fundamental rights, including property rights and the freedom to conduct business.
On property rights, the report argued that it is not self-evident that forced ownership dispersion would automatically enhance transparency.
Regarding the freedom to pursue a profession or conduct business, it warned that if the ownership ceiling effectively strips major shareholders of managerial control, the restriction could be regarded as a serious infringement of fundamental rights. The report also highlighted concerns over retroactive legislation, emphasizing that requiring shareholders to dispose of lawfully acquired shares could be deemed unconstitutional unless justified by compelling public interest grounds.
The report further noted that regulatory frameworks for virtual asset exchanges in major jurisdictions, including Europe, Hong Kong and Singapore, do not impose explicit limits on major shareholders’ equity stakes. It cautioned that introducing such a restriction in Korea could create inconsistencies with prevailing global standards.
“Although swift passage of digital asset legislation is necessary to bolster investor protection, codifying a provision that carries constitutional risks without thorough legal review could undermine trust in Korea’s commitment to the rule of law,” Rep. Kim said.