The ruling Democratic Party of South Korea has unveiled a proposed 'Digital Asset Basic Act' aimed at establishing a robust legal framework for digital assets. This includes provisions for issuance, trading, custody, and supervision. According to the proposal, 'digital assets are increasingly becoming a crucial medium that connects the real economy and financial markets.' It categorizes value-linked digital assets, such as those pegged to fiat currencies or real-world assets, as requiring authorization from issuers, maintaining refund reserves, and fulfilling redemption obligations. The proposal emerges at a time when negotiations over the Digital Asset Basic Act have stalled since early this year, primarily due to disagreements between regulators over the issuance of won-pegged stablecoins.
The Bank of Korea advocated for banks with at least 51% ownership to be the sole authorized entities for issuing stablecoins, whereas the Financial Services Commission cautioned that this could stifle innovation. The proposed legislation seeks to 'lay the groundwork for Korea to spearhead the global digital financial order.' To issue such assets, entities must secure 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, encompassing trading, brokerage, custody, and advisory services. It also establishes rules regarding disclosures, internal controls, and market conduct, including prohibitions on unfair trading practices like market manipulation and the use of non-public information.
Furthermore, the proposal advocates for the establishment 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 is primarily focused on investor protection but lacks a comprehensive framework that covers issuance, disclosure, and market structure.
This proposal follows the announcement by the Financial Services Commission and Financial Supervisory Service of new rules requiring all domestic cryptocurrency exchanges to implement a unified, stringent system for delaying withdrawals. The objective is to combat the surge in voice phishing scams that exploit speed.