As the Digital Asset Basic Act (second-phase virtual asset law) is introduced, criticism is emerging that the "equity cap for major shareholders of virtual asset exchanges" put forward by the financial authorities could violate the Constitution. Forcing existing major shareholders to sell their equity by law is tantamount to depriving people of their constitutional basic right to property. There is also criticism that this runs counter to the trend among major advanced countries' financial supervisory bodies, which focus on strengthening fitness and propriety reviews of major shareholders and responsible management.
According to the financial sector on the 2nd, the Financial Services Commission is sticking to its position that a clause capping major shareholders' equity in virtual asset exchanges at 15%–20% should be included in the second-phase virtual asset law. Because virtual asset exchanges have a strong nature as public infrastructure, the intent is to impose accountability on major shareholders by mandating dispersed ownership.
The legal community says the idea is unconstitutional. Hwang Hyun-il, an attorney who heads the virtual asset team at Shin & Kim LLC, said, "Retroactively capping a major shareholder's equity in a privately founded and developed company like a virtual asset exchange is highly likely to infringe on constitutionally guaranteed property rights. Forcing limits on ownership by law could violate the principle of prohibition of excessive restriction."
The principle of prohibition of excessive restriction is the Constitutional Court's standard for reviewing whether a specific legal provision restricts basic rights, and consists of four elements: legitimacy of purpose, suitability of means, the principle of minimum infringement, and the principle of balance of legal interests. If even one of these is not met, the Constitutional Court can rule the law unconstitutional. A legal provision ruled unconstitutional immediately loses effect.
Lee Dong-jun, managing attorney at Law Firm Yulam, said, "There are many means other than equity caps to emphasize responsible management by major shareholders of virtual asset exchanges, so it does not satisfy suitability of means," adding, "Some exchanges have major shareholders with a majority equity stake, and forcing them to sell everything except 15%–20% could also run counter to the minimum infringement principle." He continued, "Among the countless business fields, setting an upper limit only on major shareholders' equity in virtual asset exchanges can also be seen as violating the principle of balance of legal interests."
Among major advanced countries, none sets an upper limit on major shareholders' equity in exchanges. The European Union's Markets in Crypto-Assets (MiCA) regulation allows authorities to reject the appointment or change of a major shareholder if, after reviewing whether the person (or corporation) is appropriate with no history of financial crime, money laundering risk, or conflicts of interest, they determine the person unfit. The United States and Japan also focus on regulating management conduct through fitness and propriety reviews rather than the level of a major shareholder's equity.
Industry voices say that the newer the industry, such as virtual assets, the more it needs a structure that enables swift decision-making based on the strong leadership and control of the largest shareholder. If equity is forcibly dispersed and decision-making structures become complex, responsible management weakens and the momentum for innovation fades.
An industry official said, "Because of the long regulatory vacuum, the global competitiveness of the Korean virtual asset market is already declining," adding, "If a cap on major shareholders' equity becomes a reality, there are concerns that only the Korean market will become isolated from global trends in a 'Galápagos' phenomenon."
The introduction of the second-phase virtual asset law was originally planned for last year, but it has been pushed to this year as a stalemate continues on several fronts, including the controversy over capping major shareholders' equity. Discussions on introducing spot-index virtual asset ETFs and on listed companies' virtual asset transactions have not even begun.