The Democratic Party of South Korea has put forth a proposal for the 'Digital Asset Basic Act', which aims to establish a comprehensive legal framework governing digital assets. This includes regulations for issuance, trading, custody, and supervision. The proposal acknowledges the growing importance of digital assets as a key link between the real economy and financial markets. It categorizes value-linked digital assets, including those tied to fiat currencies or real-world assets, as requiring authorization from issuers, refund reserves, and redemption obligations.
This development comes at a time when negotiations over the Digital Asset Basic Act have stalled since the beginning of the year, due to disagreements between regulators over the issuance of stablecoins pegged to the won. The Bank of Korea has advocated for banks with majority ownership to be the sole issuers of stablecoins, while the Financial Services Commission has expressed concerns that this could stifle innovation. The proposed legislation seeks to 'lay the groundwork for Korea to lead the global digital financial order'. To issue such assets, entities must secure approval and meet specific requirements, including capital thresholds, operational capacity, and reserve plans.
The bill also introduces licensing, registration, and reporting requirements for digital asset businesses, covering trading, brokerage, custody, and advisory services. Furthermore, it establishes rules on disclosures, internal controls, and market conduct, including prohibitions on unfair trading practices such as market manipulation and the use of non-public information.
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 highlights that the current system in South Korea remains focused on investor protection but lacks a comprehensive framework that covers issuance, disclosure, and market structure. This proposal follows the announcement of new rules by the Financial Services Commission and Financial Supervisory Service, requiring all domestic cryptocurrency exchanges to implement a unified system for delaying withdrawals, aimed at preventing voice phishing scams that rely on speed.