The ruling Democratic Party of South Korea has put forth a proposal for the 'Digital Asset Basic Act', aiming to establish a robust legal framework for digital assets. This encompasses issuance, trading, custody, and supervision, recognizing the growing significance of digital assets as a bridge between the real economy and financial markets.
The proposal categorizes value-linked digital assets, such as those pegged to fiat currencies or real-world assets, as requiring authorization from issuers, reserve requirements for refunds, and obligations for redemption. This move comes as previous negotiations for the Digital Asset Basic Act stalled due to disagreements among regulators over the issuance of stablecoins pegged to the Korean won. The Bank of Korea advocated for banks with majority ownership to be the sole issuers of stablecoins, while the Financial Services Commission cautioned that this could stifle innovation. The proposed legislation seeks to lay the groundwork for Korea to assume a leadership role in the global digital financial order.
It stipulates that entities seeking to issue digital assets must secure approval and meet specific requirements, including capital thresholds, operational capabilities, and reserve plans. Furthermore, the bill introduces licensing, registration, and reporting mandates for digital asset businesses, covering trading, brokerage, custody, and advisory services. It also outlines rules for disclosures, internal controls, and market conduct, prohibiting unfair trading practices such as market manipulation and the use of non-public information.
Additionally, the proposal recommends the establishment of a digital asset committee to review and coordinate policy, alongside national basic and implementation plans for the sector. This legislative effort acknowledges the current regulatory shortcomings in South Korea, which primarily focus on investor protection without providing a comprehensive framework for issuance, disclosure, and market structure.
The proposal follows the recent announcement by the Financial Services Commission and Financial Supervisory Service, mandating all domestic cryptocurrency exchanges to implement a unified, stringent system for delaying withdrawals to combat voice phishing scams that exploit speed.