South Korean Regulators Propose Joint Crypto Exchange Fund to Break Oligopoly

VADODARA, January 28, 2026 — South Korean financial authorities have proposed creating a joint fund for cryptocurrency exchanges to finance social contribution activities, according to an exclusive report from Herald Business. This initiative aims to improve governance and address the oligopoly in the virtual asset market. The proposal remains in the conceptual stage with no concrete plans finalized. Market structure suggests this move targets the extreme concentration where two exchanges control over 90% of the won-denominated market.

Investigation: Regulatory Proposal Targets Market Concentration

According to Herald Business, South Korean financial authorities proposed the joint fund specifically for cryptocurrency exchanges. The fund would finance social contribution activities. This initiative forms part of a broader effort to improve governance. It directly addresses the oligopoly in the virtual asset market.

The report indicates the proposal remains purely conceptual. No concrete plans have been finalized. , the fund might only target top market operators. The two largest of South Korea's five won-denominated exchanges—Upbit and Bithumb—control over 90% of market share. Coinone, Korbit, and Gopax comprise the remaining operators.

Market Context & Historical Precedent

Historically, South Korea has implemented aggressive regulatory measures during market peaks. Similar to the 2021 correction, authorities now target structural flaws rather than outright bans. The current proposal mirrors Japan's Financial Services Agency approach following the 2018 Coincheck hack. Japan mandated exchange insurance funds to protect user assets.

In contrast, South Korea's focus on social contributions represents a novel regulatory vector. Underlying this trend is the recognition that market concentration creates systemic risk. The 90% control by two exchanges creates a single point of failure. This concentration mirrors the pre-2017 Chinese exchange before regulatory intervention.

Related developments show continued regulatory evolution. The Financial Services Commission recently delayed security token OTC exchange licenses amid market uncertainty. Meanwhile, South Korean crypto traders surged 70% in three years despite market corrections, indicating robust retail participation.

Technical Architecture & Market Structure Analysis

Market structure suggests the proposal targets liquidity concentration. The 90% market share creates what analysts term a "liquidity grab" scenario. Smaller exchanges face existential pressure. According to on-chain data, this concentration creates inefficient price discovery. Order flow concentrates in limited venues.

The proposal's technical architecture remains undefined. However, historical precedent suggests potential models. Japan's exchange insurance fund operates through mandatory contributions based on trading volume. South Korea might implement similar volume-based assessments. The fund targeting only top operators creates a progressive taxation structure.

From a blockchain governance perspective, this represents off-chain regulatory intervention. Unlike protocol-level changes like Ethereum's EIP-4844, this targets exchange behavior. The proposal creates what quantitative analysts term a "governance premium" for compliant exchanges. This premium could manifest in reduced regulatory uncertainty discounts.

By The Numbers

Why It Matters

This proposal matters because it addresses fundamental market structure flaws. The 90% concentration creates systemic risk. A single exchange failure could cascade through the South Korean crypto ecosystem. According to the Bank for International Settlements, concentrated markets exhibit higher volatility during stress events.

, the social contribution mandate represents a regulatory innovation. Traditional financial markets implement similar requirements through community reinvestment acts. The cryptocurrency sector has largely avoided such obligations. This proposal signals regulatory maturation beyond simple consumer protection.

Institutional liquidity cycles depend on market structure stability. Concentrated markets deter institutional participation due to counterparty risk. Breaking the oligopoly could attract more institutional capital. This aligns with global trends toward regulated crypto access points.

Expert Commentary

"Market structure analysis indicates extreme concentration creates inefficiency. The proposed fund represents a regulatory attempt to redistribute exchange profits toward social goods while potentially lowering barriers for smaller competitors. Historical cycles suggest such interventions precede market structure reforms, similar to post-2017 regulatory frameworks in multiple jurisdictions." — CoinMarketBuzz Intelligence Desk

Market Outlook & Price Scenarios

Market structure suggests two primary scenarios based on implementation details. The proposal's conceptual nature creates uncertainty. However, historical regulatory patterns provide guidance.

• Bullish Invalidation Level: Concrete implementation that excludes smaller exchanges from mandatory contributions, creating a competitive advantage that breaks the oligopoly below the 90% concentration threshold.
• Bearish Invalidation Level: The proposal evolving into a blanket tax on all exchanges regardless of size, further entrenching the oligopoly by increasing barriers to entry beyond current levels.

The 12-month institutional outlook depends on implementation specifics. A well-structured fund could improve market governance. This might attract institutional capital seeking regulatory clarity. Conversely, poorly designed implementation could exacerbate concentration. The five-year horizon suggests South Korea moving toward Japanese-style exchange regulation with mandatory protections.