On Wednesday, the ruling Democratic Party of South Korea introduced a proposed 'Digital Asset Basic Act' aimed at establishing a legal framework for digital assets, covering aspects such as issuance, trading, custody, and supervision. The proposal recognizes digital assets as a crucial link between the real economy and financial markets. It categorizes value-linked digital assets, including those tied to fiat currencies or real-world assets, as requiring authorization from issuers, refund reserves, and redemption obligations.
This move comes after stalled negotiations on the Digital Asset Basic Act earlier this year due to disagreements among regulators over who should be permitted to issue stablecoins pegged to the won. The Bank of Korea advocated for banks with at least 51% ownership to be the sole authorized issuers of stablecoins, while the Financial Services Commission cautioned that this could stifle innovation.
The proposed legislation seeks to 'lay the foundation for Korea to lead the global digital financial order.' To issue such assets, entities must secure approval and meet specific requirements, including capital thresholds, operational capacity, and 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, prohibiting unfair trading practices like market manipulation and the use of non-public information.
Furthermore, the proposal suggests the creation of a digital asset committee to review and coordinate policy, along with national basic and implementation plans for the sector. It highlights that the current system in South Korea focuses primarily on investor protection but lacks a comprehensive framework addressing issuance, disclosure, and market structure. This proposal follows the announcement by the Financial Services Commission and Financial Supervisory Service of new rules requiring all domestic cryptocurrency exchanges to implement a unified, strict system for delaying withdrawals, aimed at combating voice phishing scams that exploit speed.