On Wednesday, the ruling Democratic Party of South Korea proposed the 'Digital Asset Basic Act', a bill aimed at establishing a legal framework for digital assets. This framework includes regulations on issuance, trading, custody, and supervision.
The proposal acknowledges the growing importance of digital assets as a 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. The proposal seeks to create a foundation for South Korea to lead the global digital financial order and introduces licensing, registration, and reporting requirements for digital asset businesses. These businesses include trading, brokerage, custody, and advisory services, and must meet specific requirements such as capital thresholds and operational capacity.
The legislation also aims to establish rules on disclosures, internal controls, and market conduct, including prohibitions on unfair trading practices. A digital asset committee is proposed to review and coordinate policy, along with national basic and implementation plans for the sector. The current system in South Korea is focused on investor protection but lacks a comprehensive framework for issuance, disclosure, and market structure.
This proposal comes after the Financial Services Commission and Financial Supervisory Service announced new rules for domestic cryptocurrency exchanges to adopt a strict system for delaying withdrawals, aimed at preventing voice phishing scams.