South Korea Moves Closer to Passing Phase Two of Digital Asset Regulations
South Korea stands at a critical juncture in its digital asset regulatory journey, where legislative priorities intersect with monetary policy considerations and global competitiveness. As the government moves to establish a more comprehensive legal framework for stablecoins and digital asset trading platforms, disagreements are intensifying among political parties, regulators, and the central bank. These tensions reflect the broader challenge of balancing financial innovation with economic stability. At the center of this debate is the proposed Phase Two Digital Asset Law, a pivotal initiative that could shape the trajectory of South Korea’s digital asset market for years to come.
The Democratic Party of Korea has proposed tabling the Phase Two Virtual Asset Regulation Law ahead of the Lunar New Year, with the aim of regulating stablecoins and imposing clear limits on major shareholder ownership in digital asset platforms. This proposal follows ongoing regulatory discussions that began after the passage of the Digital Asset Framework Law, particularly regarding which entities should be authorized to issue won-backed stablecoins, traditional banks or private technology firms.
A key point of contention involves the proposed cap on major shareholder ownership in digital asset trading platforms, set at between 15% and 20% in the draft legislation. In parallel, the Democratic Party has called for a minimum capital requirement of approximately $3.46 million (5 billion won) for stablecoin issuers, a measure intended to strengthen financial resilience and enhance investor protection.
Concerns about Legislative Delays and Reduced Competitiveness
Meanwhile, South Korean financial experts have warned that continued regulatory disagreements could delay the legislation, according to local media reports. They caution that prolonged delays may undermine the competitiveness of South Korea’s financial markets relative to global peers.
Discussions surrounding the issuance of won-pegged stablecoins have also reached an impasse. Representative Ahn Du-gul, a member of the Digital Assets Task Force, revealed deep divisions over ownership structures, particularly regarding proposals that would require banks to hold a majority stake—50% plus one share, in stablecoin issuers.
The Bank of Korea has raised concerns about preserving the effectiveness of monetary policy and ensuring investor protection, emphasizing that banks should lead the issuance process and maintain majority ownership. In contrast, South Korea’s Financial Services Commission argues that allowing private technology companies to issue stablecoins could accelerate market entry and foster ecosystem growth. This divergence in regulatory perspectives has contributed to repeated delays, despite the bill initially being slated for release in 2025.
The debate is further complicated by opposition from industry experts, who argue that bank-dominated stablecoin issuance would effectively turn stablecoins into a new form of deposit product rather than a genuine digital currency. They contend that such an approach diverges from global regulatory trends and could significantly hinder the development of South Korea’s stablecoin market.
Experts also note that no other major jurisdiction mandates majority ownership by banks in stablecoin issuance. They point to examples from Singapore, the United States, Japan, and several European countries, where regulatory frameworks permit government-licensed private companies to issue stablecoins alongside traditional financial institutions.
The Future of Stablecoins in South Korea
At the same time, the Bank of Korea is considering the introduction of a registration system for domestic institutions seeking to issue won-pegged stablecoins, citing concerns that such assets could potentially bypass capital controls. Media reports suggest that regulatory disputes, combined with external trade pressures and exchange rate volatility, have contributed to rising tensions around the issue.
Despite these challenges, South Korea’s digital asset market continues to expand, supported by the launch of local stablecoin initiatives and the growing regulation of digital asset trading for corporate participants. Within this evolving landscape, Korea Digital Assets has partnered with privacy-focused blockchain firm Maiden to develop digital infrastructure aimed at institutional adoption, with a strong emphasis on regulatory compliance and alignment with domestic industry standards.
