The Democratic Party of South Korea has introduced a proposed 'Digital Asset Basic Act' that aims to establish a robust legal framework for digital assets. This includes regulations on issuance, trading, custody, and supervision.
According to the proposal, 'digital assets are becoming a primary medium connecting the real economy and financial markets.' It categorizes value-linked digital assets, including those tied to fiat currencies or real-world assets, as requiring authorization from issuers, refund reserves, and redemption obligations. The proposal follows stalled negotiations on the Digital Asset Basic Act, which were hindered by disagreements between regulators over who should be authorized to issue stablecoins pegged to the Korean won. The Bank of Korea advocated for banks with 51% ownership to be the sole issuers, while the Financial Services Commission warned that this could stifle innovation.
The proposed legislation seeks to 'establish a foundation for 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 bill 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, including prohibitions on unfair trading practices such as 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 highlights that South Korea's current system focuses primarily on investor protection and lacks a comprehensive framework covering issuance, disclosure, and market structure. The proposal coincides with the announcement of new rules by the Financial Services Commission and Financial Supervisory Service, which mandate all domestic cryptocurrency exchanges to adopt a unified, stringent system for delaying withdrawals to combat voice phishing scams.