The Democratic Party of South Korea has introduced a proposed 'Digital Asset Basic Act' that aims to create a legal framework for digital assets. This includes rules for issuance, trading, custody, and supervision. According to the proposal, 'digital assets are becoming a crucial link between the real economy and financial markets.' It categorizes value-linked digital assets, such as those linked to fiat currencies or real-world assets, as requiring authorization from issuers, refund reserves, and redemption obligations. The proposal has been introduced after negotiations for the Digital Asset Basic Act stalled earlier this year due to disagreements over who should be allowed to issue stablecoins pegged to the won.
The Bank of Korea suggested that only banks with 51% ownership should be authorized to issue stablecoins, while the Financial Services Commission argued 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 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 for disclosures, internal controls, and market conduct, including prohibitions on unfair trading practices like market manipulation and the use of non-public information. 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.
Currently, South Korea's system primarily focuses on investor protection but lacks a comprehensive framework covering issuance, disclosure, and market structure. This proposal follows the introduction of new rules by the Financial Services Commission and Financial Supervisory Service, requiring all domestic cryptocurrency exchanges to implement a unified system for delaying withdrawals to combat voice phishing scams.