South Korea's governing Democratic Party has introduced the 'Digital Asset Basic Act', a legislative proposal aimed at establishing a robust framework for digital assets. The act encompasses various aspects, including issuance, trading, custody, and supervision of digital assets.
It categorizes value-linked digital assets, such as those pegged to fiat currencies or real-world assets, as requiring authorization from issuers, reserve requirements, and redemption obligations. This proposal emerges amidst stalled negotiations on the Digital Asset Basic Act, which were hindered by disagreements over the issuance of stablecoins pegged to the Korean won.
The Bank of Korea advocated for banks with majority ownership to be the sole issuers of stablecoins, while the Financial Services Commission cautioned that this could stifle innovation. The proposed legislation seeks to create a foundation for South Korea to assume a leading role in the global digital financial landscape. To issue digital assets, entities must obtain approval and fulfill specific requirements, including meeting capital thresholds, demonstrating operational capacity, and establishing reserve plans.
The bill also introduces licensing, registration, and reporting requirements for digital asset businesses, such as trading, brokerage, custody, and advisory services. Furthermore, it 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 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 acknowledges that South Korea's current system prioritizes investor protection but lacks a comprehensive framework covering issuance, disclosure, and market structure. This proposal follows the announcement of new regulations by the Financial Services Commission and Financial Supervisory Service, which mandate domestic cryptocurrency exchanges to adopt a unified, stringent system for delaying withdrawals to combat voice phishing scams.