South Korea Poised to Release Crucial Stablecoin Regulation Proposal This Month

The South Korean government is expected to release its much-anticipated stablecoin regulation proposal this month, marking a significant step in implementing the country's Digital Asset Basic Act. This development follows reports that the Financial Services Commission (FSC) and the Bank of Korea (BOK) have made substantial progress in resolving key regulatory disagreements.

According to Democratic Party lawmaker Ahn Do-geol, the FSC and BOK have nearly resolved two critical points of contention: the designation of issuing entities for stablecoins and the composition of a policy consultative body to oversee implementation. This breakthrough emerged from a meeting of the ruling party's Digital Asset Task Force.

The regulatory proposal forms part of the second phase of South Korea's Digital Asset Basic Act, which aims to create comprehensive rules for the digital asset ecosystem. The timing is significant as South Korea represents one of Asia's most influential cryptocurrency markets, with its regulatory approach often setting precedents for other nations.

The regulatory process has faced delays due to disagreements between the FSC and BOK. The Democratic Party of Korea had set a December 10 deadline for the government to submit its Phase 2 Virtual Asset Bill to the National Assembly's National Policy Committee, but the FSC failed to meet this deadline due to ongoing disputes.

The central bank has advocated for a conservative approach, proposing that only consortia with commercial banks holding at least a 51% stake should be permitted to issue won-pegged stablecoins. The BOK also seeks to define stablecoin issuers as financial institutions and wants authority to request inspections of issuers through the Financial Supervisory Commission.

In contrast, the FSC has rejected the 51% stake requirement and the central bank's inspection authority request, arguing these could give the BOK excessive power. The FSC believes non-banking sectors should also participate in stablecoin issuance, noting that 14 out of 15 EU MiCA-regulated stablecoins are issued by non-banks.

Kim Sung-jin, Head of the Virtual Asset Division at the FSC, emphasized that "for a viable digital-asset ecosystem to emerge, these components need to evolve together," referring to issues like foreign user access, real-name verification systems, and the separation of finance and industry.

The delay in government legislation could lead to lawmakers' proposals being discussed first. Several legislators from both the Democratic Party and People Power Party have already proposed bills, with the Democratic Party having introduced its Basic Digital Asset Act in June to regulate stablecoins.

Once released, the proposal will move to public consultation and legislative review, giving market participants opportunities to provide feedback before parliamentary discussions and eventual implementation.