On Wednesday, South Korea's ruling Democratic Party unveiled a proposed 'Digital Asset Basic Act', aimed at establishing a robust legal framework for digital assets. This includes provisions for issuance, trading, custody, and supervision. The proposal acknowledges the growing significance of digital assets as a crucial 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, as well as refund reserves and redemption obligations.
The move comes after stalled negotiations on the Digital Asset Basic Act, which were hindered by disagreements between regulators over the issuance of won-pegged stablecoins. The Bank of Korea had advocated for banks with at least 51% ownership to be the sole issuers of stablecoins, while the Financial Services Commission warned that this could stifle innovation. The proposed legislation aims to 'lay the groundwork for Korea to take the lead in the global digital financial order'.
To issue such assets, entities must secure approval and fulfill specific requirements, including meeting capital thresholds, demonstrating operational capacity, and establishing reserve plans. The bill introduces licensing, registration, and reporting requirements for digital asset businesses, including trading, brokerage, custody, and advisory services.
It also 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. Furthermore, the proposal calls for the establishment 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 primarily focused on investor protection but lacks a comprehensive framework covering issuance, disclosure, and market structure.
The proposal follows the announcement of new rules by the country's Financial Services Commission and Financial Supervisory Service, which mandates all domestic cryptocurrency exchanges to adopt a unified, stringent system for delaying withdrawals. This aims to combat a surge in voice phishing scams that rely on speed.