South Korea's governing Democratic Party has unveiled a proposed 'Digital Asset Basic Act' that seeks to establish a robust legal framework for digital assets, covering issuance, trading, custody, and supervision. The proposal recognizes digital assets as a crucial link between the real economy and financial markets, and categorizes value-linked digital assets, such as those tied to fiat currencies or real-world assets, as requiring 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 Bank of Korea had advocated for banks with 51% ownership to be the sole authorized issuers of stablecoins, while the Financial Services Commission warned that this could stifle innovation. The proposed legislation aims to create a foundation for South Korea to lead the global digital financial order, and would introduce licensing, registration, and reporting requirements for digital asset businesses, including trading, brokerage, custody, and advisory services. It would also establish rules on disclosures, internal controls, and market conduct, including prohibitions on 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 focused 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 require all domestic cryptocurrency exchanges to adopt a unified, strict system for delaying withdrawals to combat voice phishing scams.