South Korea's Financial Services Commission (FSC) is preparing a bill to create stricter qualifications for major shareholders and reform the governance structures of virtual asset exchanges, according to Chairman Kim Byung-hwan.
The announcement came during a comprehensive state audit conducted by the National Assembly's Political Affairs Committee on October 24.
“Currently, there is no legal basis for investigating large shareholders under existing laws such as the Private Financial Information Law or the Virtual Asset Users Protection Law,” Chairman Kim said. Chairman Kim added that a revision to the Private Financial Information Law has been submitted to the National Assembly to address this gap and enable the investigation of large shareholders.
The issue of unregulated major shareholders in virtual asset exchanges was raised by People’s Power Party lawmaker Kwon Seong-dong, who criticized the lack of supervision compared to traditional financial institutions. “Banks check the qualifications of major shareholders, but there is no such procedure for virtual assets, which is problematic,” Kwon said.
Giving the example of Bithumb, one of the largest cryptocurrency exchanges in South Korea, he noted that its governance structure was heavily influenced by former Chairman Lee Jung-hoon and Initial 1 Investment Association. Kwon noted that Lee is currently on trial for 110 billion won fraud, while Initial 1 Investment Association’s de facto owner Kang Jong-hyun has been arrested on charges of embezzlement and stock price manipulation.
Kwon called on the FSC to act quickly to identify major shareholders, assess their ethical standing and ensure their social credibility. “Ultimately, I urge the Financial Services Commission to come forward so that we can quickly understand who the major shareholder is, whether they are ethically sound and whether their social credibility is guaranteed,” he said.
*This is not investment advice.