in south korea cryptocurrencyThe Digital Asset Basic Law, which was planned to constitute the second leg of the comprehensive regulation on stablecoins, could not progress due to the institutional dispute over stablecoins. While the draft law, which is expected to be ready by the end of the year, has been delayed until 2026 due to deep disagreements on who the issuers can be, the regulation contains harsh provisions focusing on investor protection. The focus of the debate is the balance of power between banks, technology companies and the monetary authority.
South Korea’s Stablecoin Framework
Draft editing, South Korea Financial Services Commission Within the scope of the “Digital Asset Basic Law” prepared by (FSC), it aims to impose obligations reminiscent of traditional finance on stablecoin issuers. Accordingly, issuers will be required to keep their reserve assets in low-risk instruments such as bank deposits or government bonds. In addition, it is planned that reserves corresponding to 100 percent of stablecoins in circulation will be entrusted to authorized depository institutions such as banks.
This structure aims to prevent the risk from being reflected directly to investors in case of bankruptcy of an issuer. Editing only stablecoinIt is not limited to ‘s. Comprehensive obligations are also imposed on cryptocurrency service providers. While information, service contracts and advertising standards are being brought to a similar level with traditional financial institutions, it is envisaged that liability for compensation will arise in cases such as cyber attack or system failure, regardless of fault. This approach is in line with the strict consumer protection regime implemented in the online retail sector in South Korea.
The draft also aims to reopen the door to initial token offerings (ICOs), which have been banned since 2017, for local projects under strict transparency and risk management conditions. Thus, the regulation aims to open space for controlled innovation while strengthening market discipline.
Issuer Debate Progress Halted
The main reason why the law has not progressed is the deep disagreement on which institutions can issue stablecoins. Bank of Korea (BOK) advocates limiting stablecoin issuance to consortiums in which banks have at least a 51 percent share. The central bank considers this model to be safer in terms of monetary stability and systemic risks.
In contrast, the FSC believes that a strict ownership threshold would push tech companies out of the system and weaken innovation. The institution is also keeping its distance from the creation of a new advisory board for the licensing process. While BOK wants a special committee to be established, FSC emphasizes that the current structure is already a legal administrative body covering the central bank and economic management.
After the process got stuck, the ruling Democratic Party started working on an alternative regulation combining different cryptocurrency drafts prepared by MPs. The discussions on this side come at a time when local stablecoin initiatives are gaining momentum in South Korea. President who took office at the beginning of the year Lee Jae Myunghas made it a priority to develop the won-indexed stablecoin market and maintain monetary sovereignty against the US dollar-dominated global market.
The Digital Asset Basic Law is a continuation of the first regulatory package that was adopted in July 2023 and entered into force in 2024 and targeted market manipulation and insider trading. However, it seems difficult to implement this second phase unless an agreement is reached between institutions.
