South Korea’s push to establish a clear regulatory framework for stablecoins has hit a roadblock, as financial authorities remain divided over who should be allowed to issue the digital assets. The delay means the country’s long-anticipated stablecoin legislation is now unlikely to move forward until next year, according to local media reports.
At the center of the debate is the proposed Digital Asset Basic Act, a sweeping piece of legislation being developed by the Financial Services Commission (FSC). The bill is designed to strengthen investor protection in the fast-growing crypto market, with a particular focus on stablecoins, which are typically pegged to fiat currencies such as the Korean won or the U.S. dollar.
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Strong safeguards for stablecoin reserves
Under the FSC’s proposal, stablecoin issuers would be required to hold reserve assets exclusively in relatively low-risk instruments, including bank deposits and government bonds. In addition, issuers would need to entrust 100 percent of these reserves to licensed custodians, such as banks.
These measures aim to reduce the risk that a stablecoin issuer’s financial trouble or bankruptcy could harm investors. By isolating reserve assets and placing them under third-party custody, regulators hope to prevent scenarios in which users are unable to redeem their tokens during periods of market stress.
The bill would also extend stricter oversight to digital asset service providers more broadly. Crypto exchanges and related firms would face disclosure rules, standardized terms of service, and advertising requirements similar to those applied in traditional financial markets. Notably, companies could be held liable for customer losses caused by hacks or system failures, even if they were not directly at fault, mirroring consumer protection standards used in online retail.
Possible return of ICOs under strict conditions
Another significant element of the proposed framework is the potential reintroduction of initial coin offerings (ICOs) for domestic projects. ICOs have been banned in South Korea since 2017, following concerns about fraud and speculative excess.
Under the new approach, ICOs could be permitted if projects meet stringent disclosure requirements and demonstrate robust risk management practices. Supporters argue this could help local blockchain startups raise capital at home rather than moving overseas, while still maintaining safeguards for investors.
A regulatory deadlock
Despite agreement on many investor protection measures, progress on the stablecoin rules has stalled due to a dispute between the FSC and the Bank of Korea (BOK).
The central bank has taken a cautious stance, insisting that stablecoin issuance should be limited to entities where banks hold at least a 51 percent ownership stake. From the BOK’s perspective, such a structure would help preserve financial stability and ensure that stablecoins do not undermine the existing monetary system.
The FSC disagrees. It argues that imposing a fixed ownership threshold would effectively shut out technology companies and limit innovation in the digital asset sector. According to the commission, the law should remain flexible enough to allow a range of qualified players to participate, as long as they meet regulatory and risk management standards.
The two institutions are also split on governance. The BOK has proposed creating a new consultative body dedicated to licensing and supervising stablecoin issuers. The FSC has pushed back, saying an additional committee would be unnecessary, as it already operates as a statutory authority that includes representatives from the central bank and the Ministry of Economy and Finance.
Political response and broader context
As the government works through these disagreements, South Korea’s ruling Democratic Party is preparing its own digital asset bill. The proposal is expected to combine several lawmaker-led initiatives in an effort to keep momentum alive while official legislation remains stalled.
Interest in local stablecoins has grown in recent months, particularly after President Lee Jae Myung, elected earlier this year, identified the development of a Korean won–based stablecoin market as a policy priority. The goal, according to officials, is to strengthen monetary sovereignty and reduce reliance on U.S. dollar–denominated stablecoins, which currently dominate global crypto markets.
The Digital Asset Basic Act is intended to form the second pillar of South Korea’s comprehensive crypto regulatory framework. The first set of rules, passed in July 2023 and implemented a year later, focuses on curbing unfair practices such as price manipulation and insider trading in digital asset markets.
Looking ahead
While the delay underscores the complexity of regulating stablecoins, it also highlights South Korea’s determination to strike a balance between innovation and financial stability. How regulators resolve the question of issuer eligibility will shape the country’s digital asset landscape for years to come, and the outcome will be closely watched by industry players at home and abroad.
