- Regulators clash over stablecoin issuers, delaying South Korea’s crypto bill
- Investor protection rules tighten as stablecoin reserves face custody demands
- Political pressure builds as Bank of Korea, FSC remain locked
South Korea’s crypto legislation has stalled as regulators remain divided over who should issue stablecoins, and according to Yonhap, disagreements between financial authorities have pushed progress on the bill into next year. At the center of the delay sits the proposed Digital Asset Basic Act, which seeks to tighten oversight while setting clear boundaries for stablecoin operations.
Investor Protection Takes Priority in Draft Law
According to the Financial Services Commission, the draft law prioritizes investor protection above market expansion. Stablecoin issuers would need to back tokens using bank deposits or government bonds. Additionally, issuers must entrust 100% of reserve assets to approved custodians, including licensed banks. Regulators believe this structure reduces investor exposure during issuer insolvency.
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Consequently, authorities aim to prevent financial risks from spilling into the broader market. Officials argue this approach mirrors safeguards already used in traditional finance. Beyond stablecoins, the proposal extends stricter rules to digital asset service providers. According to Yonhap, firms would face disclosure duties, standardized contracts, and tighter advertising standards.
Moreover, service providers could bear liability for losses caused by hacks or system failures, and this liability would apply regardless of fault under rules similar to online retail regulations. Significantly, the bill could allow domestic initial coin offerings under strict conditions that require strong disclosure practices and robust risk management systems.
South Korea banned ICOs in 2017 due to investor protection concerns. Regulators now signal cautious openness under a controlled framework.
Stablecoin Issuer Dispute Drives Legislative Deadlock
However, the question of who may issue stablecoins remains unresolved. According to Yonhap, this disagreement has become the primary obstacle to passing the bill. The Bank of Korea insists stablecoins should be issued by bank-led consortia. It proposes that banks hold at least 51% ownership to safeguard monetary stability.
In contrast, the Financial Services Commission opposes rigid ownership thresholds. The FSC argues such limits would exclude technology firms and suppress innovation. Additionally, the two institutions disagree on the oversight structure. The Bank of Korea supports forming a new committee to license stablecoin issuers.
Political Pressure and Policy Direction Intensify
Meanwhile, the FSC believes another body would duplicate existing authority. It notes that current structures already include representatives from key economic agencies. Political pressure has increased as delays persist. According to Yonhap, the ruling Democratic Party now works on a separate digital asset proposal.
Local stablecoin momentum has also grown under President Lee Jae Myung’s policy agenda. He has emphasized won-based stablecoins to counter U.S. dollar dominance. The Digital Asset Basic Act forms the second phase of South Korea’s crypto framework, with the first phase on market misconduct, including manipulation and insider trading.
Ultimately, regulatory conflict continues to slow legislative progress, and the stablecoin issuer dispute now defines the pace and direction of South Korea’s crypto policy.
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