On Wednesday, the ruling Democratic Party of South Korea introduced the 'Digital Asset Basic Act', a legislation that seeks to establish a comprehensive legal framework for digital assets, encompassing their issuance, trading, custody, and supervision. The proposal acknowledges that digital assets are becoming a crucial link between the real economy and financial markets, and thus, it defines a category of value-linked digital assets that require issuer authorization, refund reserves, and redemption obligations. This move comes after stalled negotiations on the Digital Asset Basic Act, which were hindered by disagreements between regulators over the issuance of won-pegged stablecoins. The proposed legislation aims to create a foundation for South Korea to take the lead in the global digital financial order, and to achieve this, it sets out to introduce licensing, registration, and reporting requirements for digital asset businesses.
The bill also outlines rules on disclosures, internal controls, and market conduct, including prohibitions on unfair trading practices. Furthermore, it proposes 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 focused on investor protection but lacks a comprehensive framework for issuance, disclosure, and market structure, which this proposal seeks to address. The introduction of this legislation follows the announcement of new rules by the Financial Services Commission and Financial Supervisory Service, requiring all domestic cryptocurrency exchanges to adopt a strict system for delaying withdrawals in order to combat voice phishing scams.