The Democratic Party of South Korea has introduced a proposed 'Digital Asset Basic Act' that aims to create a robust regulatory framework for digital assets. This framework encompasses issuance, trading, custody, and supervision, recognizing the growing importance of digital assets as a key link 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, and redemption obligations. Following stalled negotiations on the Digital Asset Basic Act earlier in the year, due to disagreements between regulators over the issuance of stablecoins pegged to the Korean won, this new proposal seeks to address these issues.
It suggests that entities issuing such assets must meet specific requirements, including capital thresholds, operational capacity, and reserve plans, to obtain approval. The proposed legislation also includes provisions for licensing, registration, and reporting for digital asset businesses, including trading, brokerage, custody, and advisory services. Furthermore, it outlines rules for disclosures, internal controls, and market conduct, aiming to prevent unfair trading practices. The establishment of a digital asset committee is also proposed to oversee policy and coordinate national plans for the sector.
This move comes as South Korea seeks to lead the global digital financial order, recognizing the current system's limitations in providing comprehensive coverage for issuance, disclosure, and market structure. Concurrently, the Financial Services Commission and Financial Supervisory Service have announced new rules for domestic cryptocurrency exchanges, mandating the adoption of a unified system to delay withdrawals, in an effort to combat voice phishing scams.