On Wednesday, the Democratic Party of South Korea unveiled a proposal for the 'Digital Asset Basic Act', aiming to establish a comprehensive legal framework for digital assets. This includes regulations on 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, such as those tied to fiat currencies or real-world assets, as requiring authorization from issuers, reserve requirements, and redemption obligations.
The proposal emerges amidst stalled negotiations on the Digital Asset Basic Act, which began earlier this year due to disagreements between regulators over the issuance of won-pegged stablecoins. The Bank of Korea advocated for banks with 51% ownership to be the sole authorized issuers, while the Financial Services Commission warned that this could stifle innovation. The proposed legislation seeks to 'lay the groundwork for Korea to spearhead the global digital financial order'.
To issue digital assets, entities must secure approval and meet specific requirements, including capital thresholds, operational capacity, and reserve plans. The bill introduces licensing, registration, and reporting requirements for digital asset businesses, such as trading, brokerage, custody, and advisory services. It also establishes rules on disclosure, internal controls, and market conduct, including prohibitions on unfair trading practices like market manipulation and the use of non-public information.
Furthermore, the proposal 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. It highlights that South Korea's current system primarily focuses on investor protection but lacks a comprehensive framework covering issuance, disclosure, and market structure.
The proposal follows the introduction of new rules 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.