South Korea's Landmark Crypto Bill Stalled by Stablecoin Issuance Debate
South Korea's comprehensive Digital Asset Basic Act (DABA), intended to regulate the burgeoning crypto market, has encountered a significant delay. Disagreements among key regulatory bodies, particularly concerning who should be permitted to issue Korean Won-pegged stablecoins, have halted the bill's progress. This legislative hurdle highlights a critical juncture for digital asset regulation in one of Asia's most active markets.
Key Takeaways
- Disagreement over stablecoin issuance authority is delaying South Korea's Digital Asset Basic Act (DABA).
- The Bank of Korea (BOK) favors banks holding majority ownership for stablecoin issuance, citing solvency and AML concerns.
- The Financial Services Commission (FSC) advocates for a more flexible approach, allowing fintech firms and citing international examples.
- The ruling party also opposes the BOK's strict proposal, seeking innovation and global precedent.
- The bill's passage is now unlikely before 2026, impacting South Korea's crypto regulatory landscape.
The Stablecoin Standoff
The central point of contention revolves around the issuance of KRW-pegged stablecoins. The Bank of Korea (BOK) has proposed that only banks with a minimum 51% ownership stake should be allowed to issue these digital assets. The BOK argues that financial institutions, already subject to rigorous solvency and anti-money laundering (AML) regulations, are best positioned to ensure stability and safeguard the financial system.
However, the Financial Services Commission (FSC), responsible for financial policy, holds a more flexible view. While acknowledging the importance of stability, the FSC warns that a strict "51% rule" could stifle innovation and competition. They believe this could exclude fintech firms possessing the technical expertise to develop scalable blockchain infrastructure. The FSC points to the European Union's Markets in Crypto-Assets (MiCA) regulation and Japan's fintech-led yen stablecoin projects as examples of regulated innovation that doesn't solely rely on traditional banks.
Broader Implications and Political Opposition
This deadlock reflects a global debate on the control of fiat-backed stablecoins, with potential impacts on market competition, technological advancement, and monetary oversight. Adding to the complexity, the ruling Democratic Party of Korea (DPK) has also voiced opposition to the BOK's stringent proposal. DPK lawmaker Ahn Do-geol stated that many experts are concerned the BOK's framework would hinder innovation and network effects, and that finding global legislative precedents requiring majority ownership from a specific sector is difficult.
The DPK believes that the BOK's stability concerns can be addressed through regulatory and technological measures, a sentiment reportedly shared by many policy advisors. Furthermore, the treatment of foreign-issued stablecoins presents another challenge. An earlier draft of the DABA proposed that foreign stablecoins, such as Circle's USDC, would need to be licensed and establish a local branch or subsidiary to be legally used in South Korea.
Expected Delays and Future Outlook
The ongoing regulatory deadlock is expected to push the bill's passage to at least January, with full implementation now unlikely before 2026. This delay is significant for South Korea, a nation that previously banned cryptocurrencies for nine years before beginning to soften its stance earlier this year. The DABA represents a crucial step in establishing a clear regulatory framework for the country's digital asset market.