The Democratic Party of South Korea has proposed a 'Digital Asset Basic Act' that aims to create a regulatory framework for digital assets. This includes rules for issuance, trading, custody, and supervision. According to the proposal, 'digital assets are becoming 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, refund reserves, and redemption obligations. The proposal is a response to stalled negotiations on the Digital Asset Basic Act, which began earlier this year due to disagreements between regulators over who should be allowed to issue stablecoins pegged to the Korean won.
The Bank of Korea argued that only banks with 51% ownership should be authorized to issue stablecoins, while the Financial Services Commission warned that this could hinder innovation. The proposed legislation aims to 'establish a foundation for Korea to lead the global digital financial order.' To issue digital assets, entities must obtain approval and meet certain requirements, including capital thresholds, operational capacity, and reserve plans. The bill also introduces licensing, registration, and reporting requirements for digital asset businesses, such as trading, brokerage, custody, and advisory services. Furthermore, it establishes rules on disclosures, internal controls, and market conduct, including prohibitions on unfair trading practices like market manipulation and the use of non-public information.
The proposal also calls for the creation of a digital asset committee to review and coordinate policy, as well as national basic and implementation plans for the sector. Currently, South Korea's system focuses on investor protection but lacks a comprehensive framework for issuance, disclosure, and market structure. This proposal follows the announcement of new rules by the Financial Services Commission and Financial Supervisory Service, which require all domestic cryptocurrency exchanges to adopt a single, strict system for delaying withdrawals to prevent voice phishing scams.