The Democratic Party of South Korea has introduced a proposed 'Digital Asset Basic Act' aimed at establishing a comprehensive legal framework for digital assets. This includes regulations on 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 as those requiring authorization from issuers, reserve requirements, and redemption obligations.
Following stalled negotiations on the Digital Asset Basic Act earlier this year, due to disagreements over the issuance of stablecoins pegged to the Korean won, this new proposal seeks to provide clarity. The Bank of Korea had advocated for banks with majority ownership to be the sole issuers of stablecoins, while the Financial Services Commission expressed concerns that this could stifle innovation. The proposed legislation aims to lay the groundwork for South Korea to assume a leading role in the global digital financial landscape.
To issue digital assets under this proposal, entities must secure approval and meet specific requirements, including minimum capital thresholds, operational capacity, and reserve plans. The bill also introduces licensing, registration, and reporting requirements for digital asset businesses, encompassing trading, brokerage, custody, and advisory services. Furthermore, it establishes guidelines for disclosures, internal controls, and market conduct, prohibiting unfair trading practices such as market manipulation and the use of confidential information. The proposal advocates for the establishment of a digital asset committee to oversee policy coordination and the development of national basic and implementation plans for the sector.
It highlights the current system's limitations, which primarily focus on investor protection without providing a comprehensive framework for issuance, disclosure, and market structure. This proposal follows the announcement by the Financial Services Commission and the Financial Supervisory Service, mandating all domestic cryptocurrency exchanges to implement a unified, stringent system for delaying withdrawals, aimed at curbing voice phishing scams that exploit swift transaction capabilities.