South Korea’s Stablecoin Legislation Delayed as Regulators Clash Over Issuer Rules
South Korea’s efforts to introduce a comprehensive legal framework for stablecoins have slowed, as regulators remain divided over which entities should be allowed to issue the digital assets.
The draft legislation, known as the Digital Asset Basic Act, is being developed by the Financial Services Commission (FSC) and is expected to impose some of the country’s strictest investor protection standards on stablecoin issuers. However, unresolved disagreements between key authorities have pushed progress into next year, according to local media reports.
Under the current proposal, stablecoin issuers would be required to back their tokens with highly liquid and low-risk assets, such as bank deposits or government bonds. Issuers would also need to place 100% of their reserve assets with approved custodians, including banks, in an effort to insulate investors from potential losses in the event of an issuer’s bankruptcy.
Beyond stablecoins, the draft law seeks to align digital asset service providers more closely with traditional financial institutions. Proposed measures include enhanced disclosure requirements, stricter standards for terms of service and advertising, and liability provisions that could hold service providers responsible for damages arising from hacks or system failures, regardless of fault.
The framework may also pave the way for the conditional return of initial coin offerings (ICOs) in South Korea. ICOs have been banned since 2017, but the proposed rules would allow domestic projects to raise funds through token sales, provided they meet rigorous disclosure and risk management criteria.
Regulatory deadlock
Despite these advances, stablecoin-specific regulations remain stuck over disagreements on issuer eligibility.
The Bank of Korea (BOK) has argued that stablecoin issuance should be limited to structures in which banks hold a majority stake, citing concerns over financial stability. In contrast, the FSC has opposed setting a fixed ownership threshold, warning that such restrictions could limit participation from technology firms and slow innovation in the sector.
The two institutions are also at odds over governance. The BOK favors establishing a new consultative committee to oversee stablecoin licensing, while the FSC maintains that its existing structure, already involving representatives from the central bank and the Ministry of Economy and Finance, is sufficient.
As the debate continues, South Korea’s ruling Democratic Party is preparing a separate legislative proposal that consolidates multiple lawmaker-led initiatives on digital asset regulation, adding another layer to the policy discussion.
Momentum behind stablecoin regulation has grown since President Lee Jae Myung, elected earlier this year, identified the development of a Korean won–backed stablecoin market as a national priority. The initiative aims to strengthen monetary sovereignty amid the global dominance of U.S. dollar–denominated stablecoins.
The Digital Asset Basic Act represents the second phase of South Korea’s broader cryptocurrency regulatory framework. Earlier legislation, passed in 2023 and implemented in 2024, focused on combating market abuses such as price manipulation and insider trading.
Together, the measures are intended to bring greater stability and accountability to the country’s rapidly evolving digital asset market.
