The Democratic Party of South Korea has put forth a 'Digital Asset Basic Act' that seeks to create a comprehensive legal framework governing digital assets. This framework includes provisions for issuance, trading, custody, and supervision of digital assets. The proposal recognizes the growing importance of digital assets in connecting the real economy to 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. The proposal emerges after stalled negotiations on the Digital Asset Basic Act earlier in the year, which were hindered by 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 new proposal aims to 'establish a foundation for Korea to lead the global digital financial order.' To issue digital assets under this proposal, entities must secure approval and meet specific requirements, including capital thresholds, operational capacity, and reserve plans. The legislation introduces licensing, registration, and reporting requirements for businesses involved in digital assets, including trading, brokerage, custody, and advisory services. It also establishes rules on disclosure, internal controls, and market conduct, prohibiting unfair trading practices such as market manipulation and the use of non-public information.
Furthermore, the proposal suggests the creation of a digital asset committee to review and coordinate policy, as well as national basic and implementation plans for the sector. It acknowledges that South Korea's current system primarily focuses on investor protection but lacks a comprehensive framework covering 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, strict system for delaying withdrawals, aimed at combating voice phishing scams that exploit speed.