- The Democratic Party of Korea has introduced draft legislation to ease digital asset regulations, including stablecoin issuance and crypto exchange operations.
- The new proposal would allow non-bank entities and payment providers to issue stablecoins, transferring approval authority from the Bank of Korea to the Financial Services Commission.
- Capital requirements for stablecoin issuers would be set at $365,000, significantly reduced from amounts discussed previously.
- The Bank of Korea has expressed strong concerns, citing risks to financial stability and referencing the collapse of Terra, a Korean-founded stablecoin that failed in 2022.
- Banks in Korea have also shown interest in launching joint stablecoins, amid ongoing central bank digital currency (CBDC) experiments.
The Democratic Party of Korea has presented a draft law aiming to change the digital asset landscape. The proposal, announced at a recent press conference in Seoul, would allow non-banking firms and payment platforms to issue stablecoins and would relax regulations for cryptocurrency exchanges.
Under the plan, the power to approve stablecoin issuers would move from the central bank, Bank of Korea (BOK), to the Financial Services Commission. The draft law lowers the minimum funds required for stablecoin issuers to $365,000, compared to the previously suggested $3.6 million.
Representative Min Byeong-deok stated that stablecoin platforms have a lower equity requirement because their reserves are meant to ensure users can get their money back. “The intention was to ease the barriers to entry into the system while clearly establishing measures to protect investors,” Min said. He also noted the speed of regulation was important, citing international competition.
However, the proposal has prompted strong objections from the central bank. According to Yonhap News, the BOK viewed the possible new rules as a source of “panic.” The bank warned that easily issued stablecoins backed by the Korean won could lead to sudden mass withdrawals, impacting the national currency’s strength.
The BOK highlighted that the proposed capital requirement is lower than most international standards. Capital requirements typically ensure issuers have enough money to run operations safely and cover losses if reserve assets decline in value. Korea has a recent troubled history with stablecoins—the Terra algorithmic stablecoin collapse in 2022 caused $40 billion in direct losses, contributing to other major failures in the crypto market.
The policy shift follows recent elections and matches ideas from Kim Yong-beom, the new presidential policy chief and former head of Hashed Open Research. Hashed had been linked to the Terra-Luna project, which saw rapid growth by offering unusually high interest on deposits, partially funded by grants of its own Luna cryptocurrency.
Stablecoin policy has also attracted banks’ attention. While the BOK is testing tokenized deposits and a central bank digital currency (CBDC), several major banks recently revealed plans for a collective stablecoin. News outlets report that BOK Governor Rhee Chang-yong has met with leaders from Korea’s major banks to discuss these digital asset projects.
These legislative and industry movements indicate ongoing changes in South Korea’s approach to digital assets and payments.
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