- South Korea’s Democratic Party introduced new digital asset legislation to refine stablecoin oversight.
- The Financial Services Commission keeps main supervision but must now consider the central bank’s views.
- Capital requirements for stablecoin issuers have doubled to $720,000.
- The Bank of Korea can request stablecoin data and ask for inspections.
- The central bank expressed concerns about stablecoins’ effects on foreign exchange and local banks.
South Korea’s Democratic Party has proposed new legislation, the Digital Asset Innovation Growth Act, to clarify regulation around digital assets and stablecoins. The announcement comes after the government published its Basic Digital Asset Act last week, which gave the Financial Services Commission (FSC) significant authority over stablecoin approvals.
The new bill, introduced shortly after the party’s win in the presidential election, increases minimum capital requirements for stablecoin issuers from $360,000 to $720,000. The legislation also adds oversight from the Bank of Korea (BOK), addressing earlier appeals from the central bank for a supervisory role.
The FSC remains the primary regulator for stablecoin issuers, but must now consider input from the central bank on any Korean won-based stablecoin, unless the FSC has a valid reason not to. The Bank of Korea can also request information from issuers and instruct the FSC to conduct an inspection. As reported by Korea Economic Daily, lighter regulations will apply to issuers whose total value has not surpassed $720,000 in the past year. The law also states that won-pegged stablecoins are neither securities nor electronic money.
When the first bill released, Yonhap News described the central bank’s reaction as “panic.” On June 18, BOK Governor Rhee Chang-yong said, “I think a won-based stablecoin is necessary, and I don’t oppose its issuance.” However, the governor pointed out risks for foreign exchange controls. “If a won-based stablecoin is issued, it will be easier to exchange for dollar-based stablecoins and make it difficult to manage foreign exchange,” Rhee told Nate News.
South Korea maintains rules to manage foreign currency flows, mostly focused on transactions involving U.S. dollars. The new and old legislation only address won-based stablecoins, even though dollar-backed tokens like Tether’s USDT already circulate in Korea. Recently, Circle, the company behind USDC, held meetings with lawmakers and regulators in Korea, fueling speculation about a possible won-backed stablecoin, according to Newsway.
Governor Rhee also raised issues for local banks. “If payment settlement business is transferred from banks to non-banks, we need to draw a big picture regarding the profitability of banks and changes in business structure,” he stated, noting that a shift of deposits away from banks could affect lending capacity and interest rates.
Rhee said the central bank would continue to work with the Ministry of Strategy and Finance, FSC, and other government bodies to refine these policies through further discussions.
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