- South Korea‘s ruling party is drafting a bill that would regulate stablecoins as foreign exchange payment tools and require tokenized asset issuers to hold collateral in trust.
- The proposed law would place cross-border stablecoin transactions under existing financial oversight and ban issuers from paying interest to holders.
- This legislative effort follows warnings from the central bank about the risks stablecoins pose to capital flow and foreign exchange stability.
- The draft reportedly excludes contentious issues like ownership limits for exchanges, which had previously delayed the broader Digital Asset Basic Act.
South Korea‘s ruling Democratic Party is preparing legislation that would bring stablecoins and tokenized real-world assets under stricter financial oversight, according to a report on Wednesday. The draft bill, based on an integrated version of the proposed Digital Asset Basic Act, targets the regulatory framework for two rapidly growing sectors.
Consequently, stablecoins used in cross-border payments would be classified as foreign exchange instruments under the Foreign Exchange Transactions Act. This move would automatically subject related businesses to financial oversight without requiring separate registration. Some payments for goods and services, however, would reportedly be exempt from certain reporting requirements.
Meanwhile, the draft would require issuers of tokenized real-world assets to place the underlying assets in managed trusts as defined by the Capital Markets Act. This rule aims to Tether new tokenization projects to existing custody frameworks and legal structures. The legislation also reportedly mandates that stablecoin issuers cannot pay interest to holders, regardless of how such payments are labeled.
This regulatory push aligns with earlier concerns from Bank of Korea Governor Lee Chang-yong, who warned won-denominated stablecoins could threaten capital-flow management. Notably, the draft omits key issues like exchange ownership limits, which were points of contention that previously delayed the overall digital asset bill.
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