South Korea’s Crypto Crackdown: Exchanges Face Forced Divestments, Industry Fights Back

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South Korea Moves to Break Up Crypto Exchange Ownership – And the Industry Is Pushing Back

Key Takeaways

  • South Korea plans to cap crypto exchange ownership at 15–20%, with limited exceptions up to 34%
  • Major players like Bithumb (73% owned) and Coinone (53%) face massive forced divestments
  • Upbit and Bithumb together control ~96% of domestic trading volume, serving 11 million users
  • Industry groups call the move unconstitutional; regulators say it’s necessary to prevent manipulation

The Financial Services Commission (FSC) is putting the finishing touches on a plan, developed with the ruling party’s digital asset task force, to limit how much ownership any single person or company can have in major cryptocurrency exchanges. The proposed limit is between 15% and 20% of the exchange’s total value.

This change will be included in the second phase of the Digital Asset Basic Act, which lawmakers are expected to review and approve in early 2026.

However, the FSC included a notable exception: ownership of up to 34% might be allowed under poorly defined “special circumstances.” Critics argue this loophole is so wide-ranging that it could effectively make the ownership limit meaningless.

Forced Divestments at Scale

If this law is approved as it currently stands, several leading people in the crypto world would be forced to sell off a significant amount of their cryptocurrency.

Dunamu, the company behind the Upbit cryptocurrency exchange and led by Song Chi-hyung, currently owns around 25 to 28% of the company. To meet new requirements, Song would need to sell between 5 and 10% of his shares.

Bithumb is in a particularly difficult position, as its parent company, Bithumb Holdings, owns about 73% of the exchange. Regulations would force them to sell off over 50% of their stake. Coinone Chairman Cha Myung-hoon is facing a similar issue, currently holding around 53-54% of the company.

How long crypto exchanges have to meet the new rules depends on their size. Larger exchanges, such as Upbit and Bithumb, have three years to comply. Smaller platforms – including Coinone, Korbit, and GOPAX – could have up to six years, and may even get an extra three years if needed.

Why Regulators Are Acting Now

Understanding the size of South Korea’s crypto market helps explain why regulators are taking action. Two exchanges, Upbit and Bithumb, handle about 96% of all crypto trading in the country. With over 11 million South Korean adults using these platforms – a large portion of the population – regulators have officially designated them as essential to the country’s financial system.

The trading numbers are significant. In the first three months of 2025, Upbit saw about 411 trillion Korean won (roughly $286 billion) in trades. Bithumb reported 128 trillion Korean won during the same time.

As a researcher, I’ve found the Financial Services Commission is concerned that the current level of concentration in the market, particularly with a few key owners, could easily lead to unfair practices. Specifically, they worry about things like market manipulation, illegal insider trading, and biased decisions when new tokens are listed on exchanges. It’s a situation where the potential for conflicts of interest is quite high.

Industry Opposition Is Unified – and Pointed

Industry leaders have quickly and clearly rejected the proposed changes. DAXA, the group representing South Korea’s top five stock exchanges, stated that requiring shareholders to sell their shares would be a violation of their constitutional rights. They also haven’t shown any sign of being willing to compromise on the main issue of how much ownership is allowed.

My research has revealed that the concerns aren’t limited to the immediate impact of these changes. The Korea Startup Forum has specifically cautioned me that requiring forced sales of company assets sends a discouraging message to all startup founders. They’ve also expressed worries that some companies might even consider moving their businesses to other countries to avoid being forced to restructure under these new regulations.

Some Democrats and political experts are questioning whether strict limits on property ownership are the best approach. They suggest alternatives like requiring companies to become publicly traded or increasing transparency through reporting requirements, arguing these could achieve similar results without significantly impacting property rights.

A Shifting Regulatory Landscape

The proposal to limit ownership isn’t happening in a vacuum. Just recently, in February 2026, South Korea lifted a nine-year ban on companies investing in cryptocurrency, allowing publicly traded businesses to put up to 5% of their funds into digital assets. This shows that South Korea isn’t trying to completely restrict crypto, but rather to regulate it carefully.

Interest from large financial institutions in the cryptocurrency sector is still increasing. Mirae Asset Financial Group is currently negotiating to buy Korbit for around $97.5 million. The success of this deal, and others like it, will likely depend on the final regulations and how much flexibility they allow, particularly through any exemptions for specific situations.

As an analyst, I’m anticipating parliamentary review of this bill to start around early 2026. The big question now is whether it can withstand scrutiny from opposition lawmakers – it’s really uncertain how much of the bill will ultimately survive the process.

This article is for informational purposes only and shouldn’t be considered financial, investment, or trading advice. Coindoo.com doesn’t support or suggest any particular investment or cryptocurrency. Before making any investment choices, be sure to do your own research and talk to a qualified financial advisor.

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2026-03-04 22:33