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.