SEOUL Proposal Aims to Limit Control and Reduce Risks at Crypto Platforms
The head of South Korea’s financial watchdog has
come out in favor of putting a ceiling on the stakes that cryptocurrency
exchange owners can have, a move that shows a stronger position on governance
and business risks within the rapidly expanding digital asset market of the
nation. This follows increased attempts by lawmakers and regulators to enhance
control measures given numerous global crypto crashes and internal compliance
issues.
According to some officials from the Financial
Services Commission, if there is a cap on the control that can be taken by one
shareholder or a related party in a crypto exchange, this may enhance its
transparency and protect users. This suggestion is currently under
consideration as part of the wider review of the country’s regulatory framework
for cryptocurrencies.
Why Ownership Caps Are Being Considered
Regulators posit that very high levels of ownership
concentration weaken internal controls and heighten the chances of conflicts arising.
The history of many cryptocurrency collapses across the globe reveals that
founders or controlling shareholders had disproportionate influence on
operations, risk management, as well as customer funds.
Through supporting ownership caps, FSC hopes to
lower the probability of any individual or entity taking over decision-making
in an exchange. According to these officials, such an approach makes crypto
platforms adhere better to governance norms that have been existing for years
with regard to banks, brokerage firms, etc.
How the Rules Could Work
Although specific thresholds are still being
discussed, attention is being paid to capping maximum voting rights or equity
shares owned by significant shareholders. It may be mandatory for exchanges to
diversify ownership, enhance board independence, and increase transparency
concerning related-party transactions.
The regulator has stressed that it does not intend
to suppress creativity but rather make sure that cryptocurrency exchanges in
South Korea follow certain rules for their stability and responsibility.
Industry Reaction Is Mixed
Some players in the industry admit that clearer
governance regulations could validate the sector and encourage institutional
investment. They believe that increased oversight might improve public
confidence following many years during which people were doubtful about
cryptocurrencies and their trading platforms.
On the other hand, there are those who caution
against tight ownership restrictions as they may dissuade founders and early
investors especially in a market where there are numerous exchanges set up by
small teams. Critics fear that overly strict caps could drive innovation away
to other countries should compliance costs rise too steeply.
Part of a Broader Regulatory Push
This proposal for an ownership cap is just one
aspect of South Korea’s broader plan to subject cryptocurrencies to formal
financial regulation. Recent regulatory efforts have concentrated on
safeguarding user assets, licensing exchanges, imposing reserves as well as
enhancing surveillance against market abuse.
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