Korean exchanges collectively oppose new equity regulations, escalating the conflict between policy and industry

South Korean crypto exchanges are currently facing a policy dilemma. Recently, the Korea Digital Asset Exchange Alliance (DAXA), representing the country’s five major exchanges, publicly opposed the government’s proposed shareholding cap policy. This policy plans to restrict the shareholding ratio of major shareholders in exchanges to between 15% and 20%, but industry warnings suggest that this could severely hinder the development of South Korea’s digital asset industry and even drive users and funds to overseas platforms.

Conflict Between Policy Intentions and Industry Reality

Policy Background

The shareholding cap proposal is a key component of the draft “Digital Asset Basic Act,” promoted by the Korea Financial Services Commission (FSC), which is expected to be officially released in the first quarter of 2026. This basic law aims to establish a comprehensive regulatory framework for digital assets, covering standards for stablecoin projects and spot cryptocurrency ETFs, among other things.

From a regulatory perspective, the goal of limiting shareholders’ ownership ratios is to prevent excessive control of exchanges by single shareholders, theoretically dispersing risk and protecting user rights. However, DAXA has expressed a completely different view.

DAXA’s Core Objections

DAXA outlined three main concerns in a statement:

• Custody Responsibility Issues: Dispersed ownership may weaken major shareholders’ ultimate responsibility for user assets, which is especially critical for crypto exchanges, as the security of user assets directly relates to investor rights.
• Decline in Global Competitiveness: Digital assets are characterized by cross-border circulation. If domestic investments are restricted, Korean exchanges may lose the ability to compete with global platforms, leading to user migration to overseas platforms.
• Market Stability Risks: Changes in ownership structure could disrupt existing governance systems and market stability.

In other words, DAXA believes policymakers are overlooking a reality: in a globalized crypto market, if Korean exchanges are constrained, users and funds will not stay domestically but will flow directly overseas.

Timing Sensitivity: Policy Meets Industry Restructuring

The background of this opposition is even more complex. In November last year, South Korea’s leading domestic exchange announced a merger with Naver Financial, a subsidiary of IT giant Naver. Meanwhile, Korea’s financial services group Mirae Asset Group is also in talks to acquire Korbit.

These ownership restructurings are already changing the landscape of Korean exchanges. During this sensitive period, the sudden proposal of a shareholding cap will undoubtedly increase uncertainty for existing exchanges and could impact the progress of these mergers.

Industry Dilemmas

From a market perspective, if the shareholding cap policy is ultimately approved, several chain reactions could occur:

1. Existing exchanges may need to adjust their ownership structures, possibly involving dilution or shareholder changes.
2. Investor confidence could be damaged, prompting some funds to move overseas.
3. Funding prospects for startups and new exchanges could worsen, stifling entrepreneurial spirit.
4. South Korea’s digital asset industry’s international competitiveness could further decline.

DAXA’s statement indicates that Korean crypto exchanges are providing strong feedback on policy formulation. They call for regulatory policies to prioritize industry development while referencing global standards to avoid undermining property rights and market principles.

Uncertainty About Future Directions

The Digital Asset Basic Act is expected to be officially released in the first quarter of this year, meaning the final decision on the shareholding cap should be determined soon. Whether DAXA’s opposition can influence policy-making remains uncertain.

But one thing is clear: when formulating the digital asset regulatory framework, the South Korean government needs to strike a balance between protecting user rights and supporting industry growth. Excessive intervention could lead to capital and user outflows, which would not benefit the long-term development of South Korea’s digital asset industry.

Summary

South Korea’s proposed shareholding cap policy reflects a common challenge faced by global regulators: how to protect investors without overly hindering industry innovation. DAXA’s collective opposition indicates that Korean exchanges have realized that overly strict domestic policies in a competitive global environment could weaken rather than strengthen market resilience.

The dialogue between policy and industry will continue over the coming weeks. Whether the final regulatory framework can balance both sides’ demands will directly impact the future trajectory of South Korea’s digital asset industry.