South Korea’s Cabinet approved the revised enforcement decree of the Act on Reporting and Using Specified Financial Transaction Information (Special Funds Act) on August 11, significantly strengthening the major shareholder eligibility review for virtual asset service providers (VASPs). The revision includes an exception clause that excludes major shareholders who have received criminal penalties for minor violations or under joint penal provisions from disqualification, substantially easing regulatory uncertainty surrounding the comprehensive share swap between Naver Financial and Dunamu.

The Financial Intelligence Unit (FIU) under South Korea’s Financial Services Commission officially announced the details immediately following the Cabinet’s decision. Dunamu, which operates South Korea’s largest virtual asset exchange Upbit, and Naver Financial are pursuing a major transaction through a comprehensive share swap that would make Dunamu a wholly owned subsidiary of Naver Financial. Concerns had been consistently raised during the Special Funds Act revision process that Naver’s past fair trade law violation could emerge as a critical variable in the major shareholder eligibility review. Naver was fined 200 million won (approximately $141,146) in a first-trial ruling last September for allegedly blocking a competitor’s market entry in the real estate listing information market.

The enforcement decree establishes the principle that VASPs and their major shareholders, representatives, and executives must have no history of criminal penalties of fines or heavier for money laundering or financial law violations. However, it explicitly stipulates that major shareholders are exempt from disqualification if the violation was minor or if the criminal penalty was imposed under joint penal provisions. The FIU explained that this reflects improvement recommendations from the Regulatory Reform Committee’s regulatory review. Analysts suggest that Naver’s past fair trade law violation is now highly likely to be excluded as an obstacle in the major shareholder eligibility review through this exception clause.

However, it would be premature to conclude that this enforcement decree revision alone resolves all Special Funds Act procedures for the Naver-Dunamu combination. The specific status under which Naver will be subject to review during Dunamu’s VASP registration process under the revised Special Funds Act and enforcement decree must be confirmed during the actual registration process. Separate procedures, including the Korea Fair Trade Commission’s business combination review, also remain.

The enforcement decree also includes provisions to fully expand the scope of the so-called “Travel Rule”—which requires providing sender and recipient information during virtual asset transfers—to all transactions. The information provision obligation, currently applied only to transactions of 1 million won (approximately $706) or more, will be expanded to all transactions regardless of amount. Recipient VASPs will also be required to secure and manage sender and recipient information. This measure aims to block attempts to circumvent the Travel Rule or exploit it for money laundering through “structuring”—splitting transfers into multiple small amounts.

Regulations on transactions with overseas VASPs or personal wallets are also being further strengthened. When registered VASPs transfer virtual assets with overseas operators or personal wallets, they must differentiate the permitted transaction scope based on the counterparty’s risk level. A new obligation is also introduced requiring them to establish and operate their own suspicious transaction monitoring systems for transactions of 10 million won (approximately $7,057) or more.

Registration requirements regarding VASP financial soundness have also been clarified. VASPs must maintain a debt ratio of 200% or below and have no record of undermining credit order through defaults over the past three years. Registration acceptance is also restricted for entities classified as insolvent financial institutions or whose business licenses or registrations have been revoked under financial laws. For major shareholders and executives, disqualification criteria are established by applying the Act on Corporate Governance of Financial Companies, including minors, adults under guardianship or limited guardianship, individuals not reinstated after bankruptcy declaration, and those for whom five years have not passed since a prison sentence or heavier punishment.

Among the provisions of this Special Funds Act enforcement decree revision, regulations concerning the VASP registration system and notification of sanctions against former employees will take effect immediately from August 20. The remaining provisions, including the Travel Rule expansion, will be applied sequentially starting six months after promulgation.

With a series of acquisitions and equity investments surrounding domestic virtual asset exchanges recently, the major shareholder eligibility review is expected to emerge as a key variable in future exchange governance restructuring. Mirae Asset Consulting, an affiliate of Mirae Asset Group, is pursuing the acquisition of a 92.06% stake in Korbit, and the Korea Fair Trade Commission approved the business combination last month, determining that it posed no significant risk of restricting competition in the relevant market.

Coinone has seen simultaneous entry by traditional financial firms and global virtual asset capital. Korea Investment & Securities and OKX Ventures, the investment arm of global virtual asset exchange OKX, each signed contracts in May to acquire 20% stakes in Coinone. Following the investment, CEO Cha Myung-hoon remains the largest shareholder with 30.36%, Com2uS Holdings is the second-largest shareholder with 24.54%, and Korea Investment & Securities and OKX Ventures each hold 20% as co-third-largest shareholders.

Gopax serves as a precedent demonstrating how financial authorities’ registration reviews can become a variable in exchange governance restructuring. Binance, the world’s largest virtual asset exchange, acquired a stake in Gopax in 2023 to become its major shareholder, but the acceptance of the executive change report for registering Binance-affiliated executives was delayed for over two years. The FIU accepted the report in October last year. However, since there was no separate major shareholder eligibility review system for virtual asset exchanges at that time, this case is distinct from the direct precedent of the system now being introduced.

Major Exchange Ownership Restructuring Status

ExchangeAcquiring/Investing EntityStake & DetailsRegulatory ProgressUpbit (Dunamu)Naver FinancialPursuing 100% subsidiary incorporation via comprehensive share swapSpecial Funds Act major shareholder review, KFTC business combination review in progressKorbitMirae Asset ConsultingPursuing 92.06% stake acquisitionKFTC business combination approval completedCoinoneKorea Investment & Securities, OKX Ventures20% each (co-third-largest shareholders)Contract signing completedGopaxBinanceSecured major shareholder status in 2023Executive change report accepted last October after delay

Note: Mirae Asset Consulting’s Korbit acquisition received KFTC business combination approval. For Coinone, CEO Cha Myung-hoon (30.36%) and Com2uS Holdings (24.54%) maintain key shareholder positions.

As investments in domestic exchanges by financial, platform, and global virtual asset capital continue—including Mirae Asset Consulting’s Korbit acquisition, Korea Investment & Securities-OKX Ventures’ Coinone investment, and the Naver Financial-Dunamu combination—the major shareholder eligibility review taking effect from August 20 is expected to become the most important regulatory gateway for future exchange acquisitions and equity investments. In particular, the Naver Financial-Dunamu transaction, a combination between South Korea’s largest virtual asset exchange and a major platform company, is expected to serve as a key test case demonstrating how the strengthened major shareholder review system will be applied to actual large-scale transactions.

The FIU announced that it has prepared a revised registration manual detailing registration items, required documents, deadlines, procedures, and methods in line with the strengthened VASP registration system, and plans to hold public briefing sessions for VASPs and entities preparing for registration together with the Financial Supervisory Service.