South Korea's ruling Democratic Party has put forth a proposal for a 'Digital Asset Basic Act', aiming to establish a robust legal framework for digital assets. This includes regulations for issuance, trading, custody, and supervision. The proposal emphasizes the growing importance of digital assets in connecting the real economy and financial markets.
It categorizes value-linked digital assets, such as those tied to fiat currencies or real-world assets, as requiring authorization from issuers, refund reserves, and redemption obligations. The proposal seeks to address stalled negotiations on the Digital Asset Basic Act, which were hindered by disagreements over who should be allowed to issue stablecoins pegged to the won. The Bank of Korea had suggested that only banks with 51% ownership should be authorized to issue stablecoins, while the Financial Services Commission warned that this could stifle innovation.
The new proposal aims to establish a foundation for South Korea to lead the global digital financial order. To issue digital assets, entities must obtain approval and meet specific requirements, including capital thresholds, operational capacity, and reserve plans. The legislation introduces licensing, registration, and reporting requirements for digital asset businesses, including trading, brokerage, custody, and advisory services. It also establishes rules on disclosures, internal controls, and market conduct, prohibiting 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. Currently, South Korea's system 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, requiring all domestic cryptocurrency exchanges to adopt a strict system for delaying withdrawals to combat voice phishing scams.