As the Democratic Party of Korea and the financial authorities move to cap the equity of controlling shareholders in virtual asset exchanges at about 20%, fortunes are diverging for Upbit and Bithumb, the No. 1 and No. 2 exchanges. Upbit's maximum controlling shareholder equity will fall to 19.5% (Song Chi-hyung, Dunamu chair) once its ongoing merger with Naver Financial is completed, while Bithumb's largest shareholder, Bithumb Holdings, has a 73% equity stake and would have to sell most of it.
According to the financial sector on the 5th, the Democratic Party of Korea's digital asset task force (TF) and the Financial Services Commission recently reached agreement on details related to limiting controlling shareholder equity to be included in the second-phase virtual asset law (Digital Asset Basic Act). After the law takes effect, the gist is that Upbit and Bithumb must align their largest shareholder equity to 20% within up to three years, while Coinone, Korbit, and GOPAX must align to 34% within up to six years.
During the process of producing this agreement, there was reportedly consensus within the TF and the authorities that it "should not hinder business, such as mergers or alliances among companies." If the controlling shareholder equity ceiling had been set at 15%, Dunamu, which operates Upbit, was expected to face setbacks in its merger with Naver. Mirae Asset Consulting, which acquired Korbit, holds 92% equity, but with a grace period of up to six years, it appears to have leeway.
By contrast, if the law passes as agreed, Bithumb will have to sell 53% equity within three years. For this reason, the industry says "Bithumb will suffer the biggest damage from the controlling shareholder equity regulation."
Industry resistance to the cap on controlling shareholder equity in virtual asset exchanges and the potential for unconstitutionality are variables. The National Assembly Research Service told People Power Party lawmaker Kim Sang-hoon, who asked whether the cap on exchange controlling shareholder equity could be unconstitutional, that "there is potential for unconstitutionality regarding property rights and the freedom of occupation and corporate activities." Shares are protected property rights under the Constitution, and the freedom to hold and dispose of them must also be guaranteed, so linking a controlling shareholder equity cap to license revocation could infringe property rights.
The industry also views as problematic the differential application of equity caps based on current market share. One official said, "Market share can change, so it's unclear what happens if rankings change as the grace period nears," adding, "Based on what has been released so far, the bill looks too sloppy."
The second-phase virtual asset bill was to be finalized at a party-government consultative meeting that day, but the schedule was delayed after the Financial Services Commission declared it would not attend, citing the urgency of responding to the Middle East situation. A TF official said, "An agreement has been reached, but there are still opinions within the TF opposing the equity cap. The specific figures could change at the party-government meeting."