The Democratic Party of South Korea has proposed a 'Digital Asset Basic Act' that aims to create a legal framework for digital assets. This framework includes regulations for issuance, trading, custody, and supervision of digital assets. According to the proposal, 'digital assets are emerging as a key link between the real economy and financial markets.' The proposed act categorizes value-linked digital assets, such as those tied to fiat currencies or real-world assets, as requiring issuer authorization, 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 allowed to issue stablecoins pegged to the Korean won.
The Bank of Korea had advocated for banks with at least 51% ownership to be the sole issuers of stablecoins, whereas the Financial Services Commission warned that this could hinder innovation. The new proposal aims to 'establish a foundation for Korea to lead the global digital financial order.' To issue digital assets, entities must obtain approval and meet requirements such as capital thresholds, operational capacity, and reserve plans.
The proposed legislation also introduces licensing, registration, and reporting requirements for digital asset businesses, including trading, brokerage, custody, and advisory services. Additionally, 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 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.
Furthermore, it notes that South Korea's current system is primarily focused on investor protection and lacks a comprehensive framework covering 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 implement a strict system for delaying withdrawals in order to prevent voice phishing scams.