The Democratic Party of South Korea has unveiled a proposed 'Digital Asset Basic Act' aimed at establishing a regulatory framework for digital assets, encompassing aspects such as issuance, trading, custody, and supervision. The proposal recognizes digital assets as a crucial link between the real economy and financial markets.
It categorizes value-linked digital assets, including those pegged to fiat currencies or real-world assets, as requiring authorization from issuers, reserve requirements, and redemption obligations. This move comes as negotiations for the Digital Asset Basic Act have stalled since early this year due to disagreements between regulators over the issuance of stablecoins pegged to the Korean won.
The Bank of Korea had advocated for banks with at least 51% ownership to be the sole authorized issuers of stablecoins, while the Financial Services Commission cautioned that this could stifle innovation. The proposed legislation seeks to lay the groundwork for South Korea to assume a leading role in the global digital financial landscape. To issue digital assets under this proposal, entities must secure approval and fulfill specific requirements, including meeting capital thresholds, demonstrating operational capacity, and having reserve plans in place. The bill also introduces licensing, registration, and reporting requirements for digital asset businesses, including those involved in trading, brokerage, custody, and advisory services.
Furthermore, it establishes rules regarding disclosures, internal controls, and market conduct, with prohibitions on unfair trading practices such as market manipulation and the use of non-public information. The proposal advocates for the creation of a digital asset committee to oversee policy review and coordination, as well as the development of national basic and implementation plans for the sector. It highlights that the current system in South Korea primarily focuses on investor protection but lacks a comprehensive framework that covers issuance, disclosure, and market structure.
This development follows the announcement by the Financial Services Commission and the Financial Supervisory Service of new rules requiring all domestic cryptocurrency exchanges to implement a unified, stringent system for delaying withdrawals, aimed at combating voice phishing scams that exploit speed.