Is Lee Jae-myung truly crypto-friendly? Why does the South Korean industry oppose the ruling party's Digital Asset Basic Act?

South Korea’s cryptocurrency industry regulation sparks renewed controversy. Regarding the second phase legislation of the Digital Asset Basic Act promoted by the ruling party, FourPillars Research Director @100y_eth bluntly stated that if the bill includes a “limit on exchange holdings,” it will cause severe impacts on the industry structure and capital markets, potentially even changing the ownership landscape of Korea’s centralized exchanges (CEX).

Core controversy: treating CEX as ATS and restricting major shareholders’ holdings

@100y_eth pointed out that the current Digital Asset Basic Act Phase 2 being discussed in the Korean National Assembly is similar to the US’s crypto market structure legislation, aiming to establish a clear legal framework for the crypto industry. However, the ruling Democratic Party has officially stated that it will incorporate a “limit on large shareholders’ holdings in exchanges” into the bill.

This policy logic stems from Korea’s current Capital Markets Act, which states that major shareholders of Alternative Trading Systems (ATS) cannot hold more than 15%. This implies that the government considers CEXs to have market functions similar to ATS, and therefore advocates applying the same equity restrictions to crypto exchanges to ensure market fairness and prevent concentration of power. But @100y_eth believes this analogy is highly controversial because the business models of crypto exchanges fundamentally differ from traditional securities trading infrastructure.

What will happen if the Digital Asset Basic Act Phase 2 passes?

According to FourPillars’ analysis, once the bill takes effect, the major shareholders of Korea’s five largest exchanges—Upbit, Bithumb, Coinone, Korbit, and Gopax—will be forced to sell between approximately 5% and 58% of their holdings. @100y_eth described this as a structural reorganization policy shock, equivalent to direct government intervention in the capital structure of existing companies, rather than just a regulatory upgrade.

The timing of this policy also intensifies market turbulence. In recent years, large Korean financial and tech companies have actively entered the crypto industry, such as Naver Financial evaluating the acquisition of Upbit shares, and Mirae Asset considering investing in Korbit. If the holding limit is enforced, large institutions will find it difficult to acquire controlling stakes, effectively constraining overall M&A activity. @100y_eth believes this will reduce industry consolidation and institutionalization, weakening Korea’s exchanges’ long-term competitiveness.

Rising political opposition: capitalism or quasi-nationalization?

The largest opposition party has strongly opposed this clause. Opponents argue that in a capitalist country, forcing large shareholders of developed companies to sell their holdings constitutes excessive market intervention. @100y_eth bluntly stated that if the policy is implemented, “government-mandated sale of corporate shares” is far from market economy principles and even raises questions about whether the policy thinking is approaching socialist-style ownership intervention.

Although current South Korean President and Democratic Party leader Lee Jae-myung has expressed positive attitudes toward crypto ETFs, stablecoins, and related topics multiple times, local industry insiders may not share this optimism. An exclusive interview with a Korean blockchain industry insider by Chain News revealed that even before the Digital Asset Basic Act Phase 2 debate heated up, he believed Lee Jae-myung’s positive stance on cryptocurrencies was merely a policy vote-buying tactic. The regulatory authorities’ attitude also makes it difficult for local exchanges to operate smoothly.

Is Lee Jae-myung really crypto-friendly? Why is the Korean industry opposing the ruling party’s Digital Asset Basic Act? Originally published on Chain News ABMedia.