The discussion around the enactment of the “Digital Asset Basic Act,” intended to incorporate virtual assets into the institutional framework, is accelerating, with a final tug-of-war occurring concerning the key issue of limiting major shareholders’ stakes. While financial authorities maintain their stance on introducing shareholding regulations, they appear to be considering a differentiated application according to the size of exchanges amid industry resistance.
On the 23rd, the Financial Services Commission (FSC) held a closed meeting for about 1 hour and 30 minutes at the Government Complex Seoul, chaired by FSC Vice Chairman Dae-young Kwon, with the top five virtual asset exchanges in attendance. This was the first gathering of exchange CEOs organized by the financial authorities since discussions on the Digital Asset Basic Act began in earnest. Exchange CEOs left the meeting without any comments afterward.
During the meeting, the authorities explained the main purposes of legislation related to digital asset exchanges and listened to industry opinions. The necessity for improving the governance structure of virtual asset exchanges and the basic direction of limiting major shareholders’ stakes were reportedly shared. However, specific figures on how much to limit major shareholders’ stakes were not directly discussed. Concrete measures, such as differentiated applications for shareholding limits, are expected to be included in the enforcement decrees following the bill proposal.
Essentially, the authorities believe that for establishing a sound governance structure, the rights of founders and major shareholders should be limited to around 15-20%. However, the industry argues that excessive share regulations could weaken the growth momentum of the new industry. Instead, while maintaining the principle of limiting major shareholders’ stakes, the authorities appear open to negotiating a differentiated application according to the size of exchanges, with criteria varying based on the market share of virtual asset businesses.
The idea is to apply stricter rules to large exchanges with monopoly concerns and relatively lenient regulations to small and medium-sized exchanges to maintain a competitive environment. Combining the flow of discussions between the authorities and the National Assembly, a potential plan might involve restricting major shareholders’ stakes to 15-20% for exchanges with over 50% market share, while allowing up to about 30% for other operators.
This compromise has been considered as one of the options during the process of exchanging opinions between the financial authorities and the National Assembly while seeking adjustments and enhancements to the regulatory intensity and application method. Particularly, after the recent “Bithumb 60 trillion won misallocation incident” highlighted the weaknesses in internal controls and governance risks of exchanges, discussions on introducing governance structure regulations have gained momentum.
Some in the industry speculate that if differentiated application plans are confirmed, it could weaken the incentive for a merger between Dunamu and Naver Financial. This is because large businesses are still likely to face shareholding restrictions of 15-20%, resulting in limited regulatory relief effects from a merger.
Currently, Dunamu, which operates Upbit, is estimated to hold a market share of 60-80%. If a plan to limit major shareholders’ stakes to 15% is applied, Chairman Chi-Hyung Song of Dunamu, with a 25.52% stake, would need to sell over 10 percentage points of his shares.