The implementation of South Korea's Digital Asset Basic Act, a comprehensive framework aimed at regulating crypto transactions and issuance, has been put on hold due to disagreements among regulators regarding the issuance of stablecoins pegged to the Korean won. A key point of contention is the question of which entities should be authorized to issue these stablecoins. The Bank of Korea advocates for limiting issuance to banks with a majority ownership of 51%, citing the need for stringent solvency and anti-money laundering requirements to ensure stability and protect the financial system. In contrast, the Financial Services Commission takes a more flexible stance, warning that such a restrictive approach could hinder competition and innovation by excluding fintech firms that possess the necessary technical expertise to develop scalable blockchain infrastructure.

The FSC draws parallels with the European Union's Markets in Crypto-Assets regulation, where most licensed stablecoin issuers are digital asset firms rather than banks, and points to Japan's fintech-driven yen stablecoin projects as examples of regulated innovation. This deadlock reflects a broader global debate about whether banks or fintech firms should control fiat-backed stablecoins, a decision that could significantly impact competition, innovation, and monetary oversight.

The ruling Democratic Party of Korea also opposes the Bank of Korea's proposal, with lawmaker Ahn Do-geol expressing concerns that the suggested framework could stifle innovation and network effects, and highlighting the lack of global legislative precedents for requiring institutions from a specific sector to hold a 51% stake. Furthermore, the issue of foreign-issued stablecoins is another point of contention, with an earlier draft of the government proposal suggesting that such stablecoins would be permitted in South Korea if they are licensed and have a local branch or subsidiary. This would require issuers like Circle, which issues the second-largest stablecoin USDC, to establish a presence in the country for their token to be used legally. The regulatory impasse is expected to delay the passage of the bill until at least January, with full implementation now unlikely before 2026, marking a significant shift in a country that had banned crypto for nine years before its financial watchdog began to reconsider its stance earlier this year.