A proposed 'Digital Asset Basic Act' has been put forth by South Korea's ruling Democratic Party, aiming to establish a robust legal framework for digital assets. This encompasses various aspects, including issuance, trading, custody, and supervision. The proposal recognizes the growing importance of digital assets as a key link between the real economy and financial markets. It categorizes value-linked digital assets, such as those tied to fiat currencies or real-world assets, as requiring authorization from issuers, reserve requirements for refunds, and obligations for redemption.
This move comes after stalled negotiations on the Digital Asset Basic Act, which began earlier in the year, due to disagreements between regulators over the issuance of stablecoins pegged to the won. The Bank of Korea had suggested that only banks with a 51% ownership stake should be authorized to issue stablecoins, while the Financial Services Commission expressed concerns that this could stifle innovation.
The proposed legislation aims to 'establish a foundation for Korea to lead the global digital financial order.' 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 introduces a licensing, registration, and reporting system for digital asset businesses, covering trading, brokerage, custody, and advisory services.
It also outlines rules for disclosures, internal controls, and market conduct, including prohibitions on unfair trading practices like market manipulation and the use of non-public information. Furthermore, the proposal suggests the creation of a digital asset committee to review and coordinate policy, as well as national basic and implementation plans for the sector. It acknowledges that the current system in South Korea primarily focuses on investor protection but lacks a comprehensive framework that addresses issuance, disclosure, and market structure.
This proposal follows the announcement of new regulations by the Financial Services Commission and Financial Supervisory Service, mandating all domestic cryptocurrency exchanges to implement a unified, strict system for delaying withdrawals, aimed at preventing a surge in voice phishing scams that exploit speed.