The Democratic Party of South Korea has introduced the 'Digital Asset Basic Act', a comprehensive legislative proposal aimed at establishing a clear framework for digital assets. This includes regulations for issuance, trading, custody, and supervision. The proposal acknowledges the growing importance of digital assets as a key link between 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, reserve requirements, and redemption obligations. This move comes after negotiations for the Digital Asset Basic Act stalled earlier in the year due to disagreements between regulators 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 expressed concerns that this could stifle innovation. The proposed legislation seeks to create a foundation for South Korea to assume a leadership role in the global digital financial landscape.
It stipulates that entities seeking to issue digital assets must secure approval and fulfill specific requirements, including meeting capital thresholds, demonstrating operational capacity, and having reserve plans in place. The bill introduces licensing, registration, and reporting requirements for digital asset businesses, including trading, brokerage, custody, and advisory services. It also establishes guidelines for disclosure, internal controls, and market conduct, including prohibitions on unfair trading practices such as market manipulation and the use of non-public information. Furthermore, the proposal calls for the establishment of a digital asset committee to oversee policy review and coordination, as well as the development of national 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 Financial Supervisory Service of new rules requiring all domestic cryptocurrency exchanges to implement a unified, stringent system for delaying withdrawals, aimed at combating voice phishing scams that exploit speed.