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Digital Asset Law Delayd as Stablecoin Rules Spark Disagreements Between Regulators and Central Bank
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The proposed legislation adds strict liability and full reserve backing to the bill, as well as allowing domestic token sales.
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The Upbit-Bithumb controversy fuels pressure on politicians amid ongoing crypto regulatory talks.
South Korea’s digital assets regulatory agenda is now in a period of uncertainty. The government’s proposed Basic Digital Asset Act is being delayed due to unresolved differences over stablecoin supervision and broader market regulations. The political controversy surrounding allegations of preferential treatment in the country’s crypto-exchange sector is also intensifying scrutiny for both regulators as well as lawmakers.
According to the Financial Services Commission and the National Assembly the government is still reviewing Phase 2 Virtual Asset Bill (formally known as Basic Digital Asset Act) under its supervision. The draft legislation will introduce measures to protect investors, including strict liability for damages that are imposed on digital assets operators and safeguards to protect stablecoin users against issuer bankruptcy.
The bill requires stablecoin issuers back their tokens in full with reserve assets, such as government bonds or deposits. According to the proposal, at minimum 100% of issued balances must be deposited or entrusted with banks or other designated custodians. Additional provisions could align disclosure obligations, advertising standards, and contract standard for digital asset firms to those applied in traditional financial transactions, following principles of the Electronic Financial Transactions Act.
The legislation could also allow domestic digital asset sales, if adequate disclosures are made. This may address practices that emerged following South Korea’s 2017 ban on domestic initial coins offerings.
Despite a broad consensus on the framework, the bill’s submission has been delayed until next year. The authority for stablecoin issuing is a major point of contention. The Bank of Korea argues that only consortia owned by majority banks should be allowed to issue stablecoins. They cite concerns about stability and compliance.
Financial Services Commission, on the other hand, has reportedly been against setting rigid ownership thresholds and has stressed flexibility to support technology participation. There are also differences over whether a separate consensus group is required to approve stablecoins and about minimum capital requirements. These have been discussed at ranges between 500 million won and 25 billion won.
Political Controversy Raises Questions about Governance
As regulatory discussions continue to be discussed, the political spotlight has been focused on allegations involving Kim Byung Ki, floor leader of ruling Democratic Party. Former aides claim that Kim instructed lawmakers to criticize Upbit and its operator Dunamu while his son secured an internship with the rival exchange Bithumb.
Local media reported that the claims were based on alleged instructions given by Kim during his tenure as a member of the Political Affairs Committee of National Assembly. Kim has denied targeting a specific company and rejected any suggestions of impropriety. Bithumb, on the other hand, said that its hiring process was transparent.
The controversy has led to calls for Kim’s resignation from both the People Power Party, an opposition party, and several smaller parties. This has added political pressure to South Korea as it works on finalizing its next phase in digital asset regulation.
Related to South Korea Advances Digital Asset Basic Act with Bank-Led Stablecoin Issuing Requirement
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