On Wednesday, South Korea's ruling Democratic Party unveiled a proposed 'Digital Asset Basic Act' aimed at establishing a robust legal framework for digital assets. This framework encompasses issuance, trading, custody, and supervision, recognizing the growing importance of digital assets as a key link between the real economy and financial markets.
The proposal categorizes value-linked digital assets, such as those tied to fiat currencies or real-world assets, as requiring issuer authorization, refund reserves, and redemption obligations. This development follows stalled negotiations on the Digital Asset Basic Act earlier in the year, which were hindered by disagreements between regulators over the issuance of won-pegged stablecoins.
The Bank of Korea advocated for banks with a 51% ownership stake to be the sole authorized issuers of stablecoins, while the Financial Services Commission expressed concerns that this could stifle innovation. The proposed legislation seeks to 'establish a foundation for Korea to lead the global digital financial order' by introducing stringent requirements for entities seeking to issue digital assets, including approval, capital thresholds, operational capacity, and reserve plans.
Furthermore, it outlines licensing, registration, and reporting requirements for digital asset businesses, including trading, brokerage, custody, and advisory services. The bill also proposes 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.
Additionally, it calls for the creation of a digital asset committee to review and coordinate policy, as well as national basic and implementation plans for the sector. The current system in South Korea is criticized for focusing primarily on investor protection while lacking a comprehensive framework that covers issuance, disclosure, and market structure. This proposal comes on the heels of the Financial Services Commission and Financial Supervisory Service announcing new rules requiring all domestic cryptocurrency exchanges to adopt a unified, strict system for delaying withdrawals.
This move aims to combat a surge in voice phishing scams that rely on swift transaction processing.