South Korea's governing Democratic Party has introduced a proposed 'Digital Asset Basic Act' that aims to establish a robust legal framework for digital assets, covering key aspects such as issuance, trading, custody, and supervision. The proposal acknowledges the growing significance of digital assets as a vital link between the real economy and financial markets, and defines value-linked digital assets - including those pegged to fiat currencies or real-world assets - as a category that necessitates issuer authorization, refund reserves, and redemption obligations. This development comes amid stalled negotiations on the Digital Asset Basic Act, which were hindered by disagreements between regulators over the issuance of won-pegged stablecoins. The proposed legislation seeks to 'establish a foundation for Korea to lead the global digital financial order' by introducing licensing, registration, and reporting requirements for digital asset businesses, including trading, brokerage, custody, and advisory services.
Furthermore, it outlines rules on disclosures, internal controls, and market conduct, including prohibitions on unfair trading practices. 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, highlighting the need for a comprehensive framework that extends beyond investor protection to encompass issuance, disclosure, and market structure.