South Korea Advances Stablecoin Legalization with New Digital Asset Bill, Crypto Stocks Surge

South Korea is making significant progress toward legalizing domestic stablecoins through the introduction of the Digital Asset Basic Act by the ruling Democratic Party, following the inauguration of President Lee Jae-myung. The bill permits local companies to issue stablecoins under strict conditions, including a minimum equity capital of 500 million won (approximately $368,000), guaranteed reserves for refunds, and regulatory approval from the Financial Services Commission.

This legislation aims to enhance transparency and competition in South Korea's crypto sector and is accompanied by moves to establish a Presidential Digital Asset Committee for industry oversight. The proposed law also includes provisions for tokenized securities offerings, signaling a broader commitment to modernizing the financial regulatory environment for digital assets.

President Lee, a pro-crypto progressive, has pledged to launch a won-backed stablecoin, legalize crypto funds, and allow Bitcoin exchange-traded funds (ETFs). His initiatives aim to prevent capital outflows and bolster one of Asia's largest crypto markets, with approximately 18 million South Koreans participating. The Bank of Korea has voiced opposition, citing concerns that stablecoins issued by non-bank entities could undermine monetary policy effectiveness and arguing that the central bank should lead any digital currency developments.

The market has reacted positively, with notable rallies in crypto-linked stocks such as KakaoPay, which surged up to 45% in five days amid rising investor optimism. However, some analysts caution that tangible benefits from these policies remain uncertain at this stage.