On Wednesday, South Korea's governing Democratic Party introduced a proposed 'Digital Asset Basic Act', aiming to establish a robust legal framework for digital assets. This encompasses issuance, trading, custody, and supervision.
According to the proposal, 'digital assets are emerging as a vital link between the real economy and financial markets.' It categorizes value-linked digital assets, including those pegged to fiat currencies or real-world assets, as requiring authorization from issuers, reserve funds, and redemption obligations. The proposal has been introduced amidst stalled negotiations on the Digital Asset Basic Act, which began earlier this year.
Regulators were at odds over who should be permitted 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 bill seeks to 'lay the groundwork for Korea to spearhead the global digital financial order.' To issue digital assets, entities must secure approval and fulfill requirements, including meeting capital thresholds, demonstrating operational capacity, and establishing reserve plans.
The legislation would introduce licensing, registration, and reporting requirements for digital asset businesses, encompassing trading, brokerage, custody, and advisory services. It would also establish rules on disclosure, internal controls, and market conduct, including prohibitions on unfair trading practices, such as market manipulation and the use of non-public information.
The proposal advocates for 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 is focused primarily on investor protection, lacking a comprehensive framework that covers issuance, disclosure, and market structure.
The proposal follows the announcement of new rules by the country's Financial Services Commission and Financial Supervisory Service, ordering all domestic cryptocurrency exchanges to adopt a unified, stringent system for delaying withdrawals. This aims to prevent a surge in voice phishing scams that rely on speed.