On Wednesday, the ruling Democratic Party of South Korea unveiled a proposed 'Digital Asset Basic Act', which aims to establish a comprehensive legal framework for digital assets. This includes provisions for issuance, trading, custody, and supervision. The proposal asserts that digital assets are becoming a crucial link between the real economy and financial markets. It categorizes value-linked digital assets, such as those tied to fiat currencies or real-world assets, as requiring authorization from issuers, as well as refund reserves and redemption obligations.
This proposal emerges amidst stalled negotiations on the Digital Asset Basic Act, which began earlier this year when regulators disagreed on who should be allowed to issue stablecoins pegged to the Korean won. The Bank of Korea advocated for banks with at least 51% ownership to be the sole authorized issuers, while the Financial Services Commission cautioned that this could stifle innovation. The proposed legislation seeks to 'lay the groundwork for Korea to lead the global digital financial order'. To issue digital assets, entities must obtain approval and fulfill requirements such as 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 disclosures, internal controls, and market conduct, including prohibitions on unfair trading practices like market manipulation and the use of non-public information. Furthermore, the proposal recommends the creation of a digital asset committee to review and coordinate policy, as well as national basic and implementation plans for the sector. It notes that South Korea's current system primarily focuses on investor protection but 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 mandate all domestic cryptocurrency exchanges to adopt a unified, strict system for delaying withdrawals, aiming to prevent a surge in voice phishing scams that rely on speed.