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South Korea Plans Tough Stablecoin Rules, But Regulatory Deadlock Persists
South Korea is moving cautiously toward comprehensive stablecoin regulation, though a key proposal has been delayed as authorities remain deadlocked over who should be allowed to issue these digital assets.
Digital Asset Basic Act Targets Investor Safety
The Financial Services Commission (FSC) is developing the Digital Asset Basic Act, which seeks to impose strict investor protection requirements on stablecoin issuers. Under the proposal, issuers would be required to manage reserve assets through bank deposits or government bonds and entrust 100% of reserves with regulated custodians, such as banks.
The legislation also aims to hold digital asset service providers accountable for system failures or hacks, mirroring protections in traditional finance, while requiring compliance with disclosure, terms of service, and advertising standards. Additionally, the act could pave the way for initial coin offerings (ICOs) for local projects that meet rigorous disclosure and risk management requirements, lifting the domestic ICO ban in place since 2017.
Deadlock Between FSC and Bank of Korea
Despite progress, the stablecoin regulatory framework remains stalled due to disagreements between the FSC and the Bank of Korea (BOK). The BOK insists that only a consortium of banks holding at least 51% of the stake should issue stablecoins, while the FSC argues that such a rule would stifle tech innovation.
Authorities also disagree on whether to form a dedicated licensing committee: the BOK supports a new body, whereas the FSC believes its existing administrative structure, which already includes representatives from the BOK and the Ministry of Economy and Finance, is sufficient.
Local Stablecoin Ambitions Grow
The debate comes as President Lee Jae Myung pushes for a Korean won-backed stablecoin to bolster monetary sovereignty against U.S. dollar-pegged stablecoins. The proposed Digital Asset Basic Act represents the second part of South Korea’s evolving crypto regulations, following rules passed in July 2023 that targeted market manipulation and insider trading.
As the nation balances innovation with investor protection, the outcome of the stablecoin regulatory debate could set the stage for South Korea’s crypto market in 2025 and beyond.
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