The National Assembly Research Service found that the ruling camp's push to cap the equity ratio held by major shareholders of virtual asset exchanges could be unconstitutional.
According to a report submitted by People Power Party lawmaker Kim Sang-hoon to the National Assembly Research Service on the 4th, the "cap on the equity ratio of major shareholders of virtual asset exchanges," which has emerged as a key issue in the phase-two virtual asset legislation debate, appears to carry the risk of unconstitutionality.
It also turned out to be difficult to find similar legislative examples in major countries overseas.
The National Assembly Research Service analyzed that there is a possibility it could be judged unconstitutional in terms of property rights (Article 23 of the Constitution), freedom of occupation and freedom of corporate activity (Article 15 of the Constitution), and issues related to retroactive legislation (Article 13 of the Constitution).
Specifically, it said further review is needed on the causal relationship between equity dispersion and enhanced transparency from the perspective of property rights. It also noted that, from the standpoint of freedom to pursue an occupation, if the equity ratio cap results in a structure that causes a loss of managerial control, the degree of infringement could be assessed as severe.
It further emphasized that, in terms of retroactive legislation, a regulation that retroactively requires the forced disposition of equity that major shareholders of virtual asset exchanges had lawfully acquired could be deemed unconstitutional absent extraordinary circumstances such as a compelling public interest.
The National Assembly Research Service also analyzed that regulations capping the equity ratio of major shareholders are not found in the regulatory frameworks for virtual asset exchanges in major overseas jurisdictions such as the European Union (EU), Hong Kong and Singapore, pointing out problems in terms of global consistency.
It added that while the Financial Investment Services and Capital Markets Act does contain provisions limiting the equity ratio of major shareholders for alternative trading systems (ATS), the context differs because ATS presuppose ownership equity limits from the establishment stage, whereas for virtual asset exchanges the requirement would be to restructure ownership ex post for operators already in business.
People Power Party lawmaker Kim Sang-hoon said, "It is clear that a phase-two virtual asset bill must be prepared swiftly to protect investors, but if provisions with potential unconstitutionality, such as an equity ratio cap, are legislated without sufficient review, it could undermine trust in the principles of the rule of law in the Republic of Korea."