South Korea's Democratic Party has put forth a proposed 'Digital Asset Basic Act' that would create a regulatory framework for digital assets, encompassing their issuance, trading, custody, and supervision. The proposal recognizes digital assets as a key link between 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, reserve requirements, and redemption obligations. This move comes after stalled negotiations on the Digital Asset Basic Act earlier in the year, due to disagreements between regulators over who should be allowed to issue stablecoins pegged to the won. The Bank of Korea advocated for banks with majority ownership to be the sole issuers, while the Financial Services Commission expressed concerns that this could stifle innovation. The proposed legislation aims to establish a foundation for South Korea to lead the global digital financial order.
To issue digital 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, including trading, brokerage, custody, and advisory services.
It also outlines rules for 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 establishment of a digital asset committee to review and coordinate policy, as well as national basic and implementation plans for the sector. It highlights that the current system in South Korea focuses primarily on investor protection but lacks a comprehensive framework for issuance, disclosure, and market structure. This proposal follows the introduction of new rules by the Financial Services Commission and Financial Supervisory Service, mandating all domestic cryptocurrency exchanges to implement a unified, strict system for delaying withdrawals to combat voice phishing scams.