The Korea Internet Companies Association has strongly opposed financial authorities' moves to limit major shareholders' stakes in virtual asset exchanges.

On Tuesday, the association issued a statement expressing deep concern about the regulatory plan being pursued by financial authorities. The authorities define exchanges as public infrastructure and aim to cap major shareholders' stakes at 15 to 20 percent, while reviewing the introduction of bank-centred stablecoins.

The association criticised the measure as excessive regulation aimed at retroactively controlling an industry that has grown through private-sector innovation. It said demanding forced share sales after a market has formed is a clear violation of private property rights and undermines the constitutional principle of protection of legitimate expectations.

It also raised the possibility of a decline in global competitiveness. The association said an unprecedented stake cap worldwide could act as a "Galapagos" regulation and lead to investment avoidance across domestic ventures and startups.

It issued a strong warning about the risk of an outflow of national wealth. If major shareholders' stakes are capped at around 15 percent, it would become virtually impossible for founders to defend management control. It said this would create a structure vulnerable to hostile mergers and acquisitions by foreign capital, allowing profits and decision-making power created domestically to move overseas.

The association also took aim at plans for bank-led stablecoin issuance. "Most stablecoins that have succeeded in the global market were led by innovative non-bank companies," it said. "A plan that allows entry into the market only if a bank holds a majority stake is a vested-interest protection policy that blocks innovation," it added.

The association urged a full review of the policy to cap major shareholders' stakes in virtual asset exchanges. It also called for guaranteeing innovative private companies' participation in the stablecoin market and establishing balanced policies.