"Concerns grow that Digital Assets Framework Act ‘equity ownership rules’ could curb startup innovation"

A proposal has emerged warning that key agenda items in the Digital Assets Framework Act—second-stage legislation on digital assets—namely equity ownership restrictions on digital asset exchanges and a bank-centered issuance structure for stablecoins (digital assets pegged to fiat currency values), could slow startup innovation.

Rep. Park Min-kyu of the Democratic Party of Korea, who attended the ‘Roundtable on protecting startup management control and exploring a rational regulatory framework’ held on the 18th at the National Assembly building in Yeouido, Seoul, said, “There was friction during the legislative process as a measure was put forward to limit the ownership stake of controlling shareholders of exchanges,” adding, “I agree with the goals of boosting market trust and protecting users, but we must not undermine future growth engines.” Park added that he would “share today’s discussions with party lawmakers and seek to persuade them.”

The roundtable was co-hosted by Reps. Park Min-kyu, Kim Han-kyu, and Min Byung-deok of the Democratic Party, and organized by the Korea Startup Forum.

Participants focused on the risk that restrictions on exchange equity stakes could weaken innovation.

Choi Sung-jin, head of the Startup Growth Research Institute, argued in his presentation that “the Digital Assets Framework Act fails to meet any of the criteria for judging good policy—▲whether it reduces risk ▲whether it erodes innovation incentives ▲whether it aligns with global regulation ▲whether it promotes competition.”

Choi warned that “the currently pursued equity-cap policy cannot fundamentally resolve core risks such as safeguarding customer assets, internal controls, and anti-money laundering,” adding that “if stakes are forced to be sold, they are likely to end up with foreign capital, large conglomerates, traditional financial institutions, or private equity (PE), which could create side effects that undermine market stability.” He also noted that “excessive dispersion of ownership can lead to a bystander effect and dampen founder incentives.”

Choi further stressed that the proposed exchange equity rules contradict the policy direction of the Lee Jae-myung administration. “Policy has recently been designed to recognize digital asset exchanges as venture companies and protect founders’ management control,” he said. “But introducing regulations that simultaneously cap ownership stakes could reduce policy coherence,” raising concerns. He added, “With the government emphasizing the fostering of ventures and startups, regulations that weaken founders’ accountable management need to be reconsidered.”

Kim Yun-kyung, a professor in the Department of Northeast Asian Logistics at Incheon National University and the second presenter, said, “The inclusion of exchange equity limits in the government’s draft of the Digital Assets Framework Act can be seen as derived from existing stock exchange equity regulation,” but added, “Digital asset exchanges operate in a globally competitive market, so applying the same style of equity regulation used for domestic stock exchanges is not appropriate.”

He continued, “Major countries regulate not by dispersing ownership stakes, but by focusing on fit-and-proper tests for controlling shareholders and management and by strengthening internal controls,” explaining that “equity caps can block market entry and slow participation.”

There was also an assessment that issuing stablecoins under a bank-centered structure could have negative effects on competition and the broader ecosystem.

Choi pointed out, “Issuing stablecoins through banks does not fully eliminate monetary policy risks,” adding that “if stablecoin issuance revolves around commercial banks, it could harm market diversity.”

Prof. Kim also said, “A bank-centered stablecoin issuance structure lacks clarity in regulatory objectives and tools,” adding, “Rather than limiting who can issue, the system should be designed to secure investor protection and market stability.”