South Korea Weighs 20% Cap on Crypto Exchange Major Shareholders Despite No Legal Review in Five Years

South Korea’s Financial Services Commission is pushing a plan to cap stakes held by major shareholders in cryptocurrency exchanges despite conducting no related legal review or advisory work over the past five years.

Edaily reported on September 1 that the commission disclosed the absence of any internal or external legal reviews or advisory records in audit materials submitted to Rep. Park Min-kyu of the National Assembly’s Political Affairs Committee. It also provided no separate records of related research projects or consultations with other government agencies.

The commission is reviewing a provision for the government’s draft Digital Asset Basic Act that would, in principle, limit stake ownership by major shareholders of virtual asset businesses to 20%. An exception allowing holdings of up to 34% for companies that meet certain requirements is also under discussion.

A proposal to restrict voting rights attached to shares held above the ownership cap is also being reviewed, Edaily reported. The commission said details, including the ceiling on major shareholders’ stakes, have not been finalized.

The National Assembly Research Service previously said requiring existing major shareholders to dispose of their holdings or accept limits on voting rights could raise legal issues involving constitutional property rights, freedom of occupation and business activity, and the principle barring retroactive legislation.

The government is set to submit its draft of the Digital Asset Basic Act this month to Rep. Yoo Dong-soo, the Democratic Party lawmaker who chairs the National Assembly’s Political Affairs Committee. Curbs on major shareholders’ stakes in crypto exchanges have emerged as one of the main issues in drafting the bill.