South Korea's Digital Asset Act Nears Final Draft Amid Regulatory Tensions

VADODARA, February 4, 2026 — The Democratic Party of Korea's Digital Asset Task Force is finalizing a basic act on digital assets, marking a moment in the country's regulatory framework. This latest crypto news reveals internal conflicts over exchange ownership limits, potentially stalling legislative progress. Market structure suggests these developments could exacerbate current liquidity pressures.

Investigation: The Legislative Push and Its Contradictions

According to Digital Asset's exclusive report, the Task Force plans to consolidate five related bills into a unified proposal this week. Policy Committee Chairwoman Han Jeong-ae will sponsor the bill after government coordination. However, the Financial Services Commission advocates for limiting major shareholders' stakes in exchanges to 15-20%, mirroring Alternative Trading Systems (ATS) rules. In contrast, Task Force members and industry representatives oppose this measure, creating a regulatory deadlock.

This contradiction highlights a fundamental tension between oversight and innovation. Market analysts note that such limits could trigger a liquidity grab, forcing exchanges to restructure ownership. On-chain data indicates similar regulatory moves in other jurisdictions have led to short-term volatility. The legislative process may face significant hurdles, delaying implementation.

Market Context & Historical Precedent

Historically, South Korea's crypto regulations have swung between permissiveness and strict control. The 2017 ICO ban and subsequent exchange licensing requirements set a precedent for cautious oversight. Underlying this trend is a desire to protect retail investors while fostering technological growth. In contrast, the current push for ownership limits diverges from global norms, where exchanges often operate with concentrated ownership.

This development occurs amid broader regulatory shifts. For instance, recent moves in Europe under MiCA have focused on consumer protection rather than ownership structures. Consequently, South Korea's approach could isolate its market, impacting cross-border liquidity flows. The recent $33 million ETH dump to Binance how regulatory uncertainty drives institutional exits.

Technical Architecture & Price Action

Market structure suggests Bitcoin's current price of $75,971 sits near a critical Fibonacci 0.618 support level at $75,000. A break below this level would invalidate the bullish order block established in late 2025. RSI readings hover near oversold territory, indicating potential for a short-term bounce. However, volume profile analysis shows weak buying interest, aligning with the Extreme Fear sentiment.

The regulatory news compounds technical weaknesses. Ownership limits could reduce exchange liquidity, creating fair value gaps (FVGs) in altcoin markets. For example, Ethereum's price action may face additional pressure if Korean exchanges, which hold significant ETH reserves, are forced to divest. This mirrors past cycles where regulatory announcements triggered sharp sell-offs, as seen in China's 2021 mining ban.

By The Numbers

Why It Matters

This legislation matters because South Korea is a top-five crypto market by volume. Ownership limits could destabilize exchange operations, leading to reduced liquidity and increased volatility. Institutional players might withdraw capital, exacerbating the current Extreme Fear sentiment. Retail investors could face higher transaction costs and slippage.

Real-world evidence from past regulatory changes supports this. For example, Japan's 2018 exchange regulations led to a 30% drop in trading volume initially. Market structure suggests similar outcomes are likely if the stake limits are enforced. The revenue surge at Kraken shows institutional maturation elsewhere, contrasting with Korea's restrictive approach.

Expert Commentary

"The proposed stake limits create a regulatory arbitrage opportunity. Exchanges may relocate to jurisdictions with friendlier policies, draining liquidity from South Korea. This could undermine the very investor protection goals the FSC aims to achieve." — CoinMarketBuzz Intelligence Desk

Market Outlook & Price Scenarios

Two data-backed scenarios emerge from current market structure. First, if the legislation passes without strict limits, it could provide regulatory clarity, boosting investor confidence. Second, if limits are enforced, expect continued selling pressure as exchanges restructure.

• Bullish Invalidation Level: $82,000. A break above this resistance would signal renewed institutional buying, invalidating the bearish narrative.
• Bearish Invalidation Level: $75,000. A sustained break below this Fibonacci support confirms a deeper correction, potentially targeting $70k.

The 12-month outlook hinges on legislative outcomes. If compromises are reached, South Korea could attract more institutional capital, aligning with global trends. However, strict limits may isolate the market, reducing its influence. Over a 5-year horizon, this could shift liquidity to regions like the EU or Singapore, where frameworks balance innovation and oversight.