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.