The ruling Democratic Party of South Korea has introduced a proposed 'Digital Asset Basic Act' that aims to establish a robust legal framework for digital assets. This framework encompasses various aspects, including issuance, trading, custody, and supervision of digital assets. The proposal recognizes the growing importance of digital assets as a key medium connecting 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, maintaining refund reserves, and fulfilling redemption obligations. The proposal follows 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 advocated for banks with 51% ownership to be the sole authorized entities to issue stablecoins, while the Financial Services Commission expressed concerns that this could stifle innovation. The proposed legislation seeks to 'establish a foundation 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 on disclosures, internal controls, and market conduct, prohibiting unfair trading practices such as market manipulation and the use of non-public information.
Furthermore, the proposal 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. The current system in South Korea is primarily focused on investor protection but lacks a comprehensive framework covering issuance, disclosure, and market structure.
This proposal comes after the Financial Services Commission and Financial Supervisory Service announced new rules requiring all domestic cryptocurrency exchanges to adopt a unified, strict system for delaying withdrawals to combat voice phishing scams.