The ruling Democratic Party of South Korea has put forth a proposal for the 'Digital Asset Basic Act', which aims to establish a robust legal framework governing digital assets. This includes regulations on issuance, trading, custody, and supervision.
According to the proposal, 'digital assets are emerging as a vital link between the real economy and financial markets.' It categorizes value-linked digital assets, such as those pegged to fiat currencies or real-world assets, as requiring authorization from issuers, refund reserves, and redemption obligations. The proposal follows stalled negotiations on the Digital Asset Basic Act, which were hindered by disagreements between regulators over who should be permitted to issue stablecoins pegged to the Korean won. The Bank of Korea advocated for banks with at least 51% ownership to be the sole issuers of stablecoins, while the Financial Services Commission argued that this could stifle innovation.
The proposed legislation seeks to 'establish a foundation for Korea to lead the global digital financial order.' To issue digital assets, entities must obtain 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, encompassing trading, brokerage, custody, and advisory services. It also establishes rules on disclosure, internal controls, and market conduct, including prohibitions on unfair trading practices such as 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.
The current system in South Korea is focused primarily on investor protection and lacks a comprehensive framework covering issuance, disclosure, and market structure. This proposal comes on the heels of the Financial Services Commission and Financial Supervisory Service announcing new rules requiring all domestic cryptocurrency exchanges to implement a unified, stringent system for delaying withdrawals. This move aims to curb the surge in voice phishing scams that rely on speed.