South Korea’s Democratic Party Advances Cryptocurrency Regulation Bill

The Digital Asset Basic Act is a proposed legislation introduced by South Korea’s ruling Democratic Party, under the leadership of President Lee Jae-myung. This law aims to establish a legal framework for the issuance of stablecoins in the U.S. while also regulating digital assets comprehensively.

Legalizing Domestic Stablecoins

The proposed regulation permits domestic companies to create their own stablecoins, provided they adhere to specific guidelines. These include maintaining a minimum equity of 500 million won (approximately $368,000), fully reserving backup assets, and obtaining approval from the Financial Services Commission. This regulatory framework is designed to foster innovation while ensuring economic stability and consumer protection.

In the first quarter of 2025, South Korea’s stablecoin trading volume exceeded 57 trillion won (around $42 billion), underlining the necessity for clear regulations. This legislation aims to enhance transparency and accountability in this rapidly evolving sector.

Delivering on Campaign Promises

President Lee, who assumed office on June 3, made a significant commitment during his campaign to propose this bill, reflecting his long-standing support for the inclusion of digital assets in the national economy. While campaigning for the presidency, he advocated for the creation of a won-denominated stablecoin to mitigate capital flight and empower citizens with greater financial control.

The government is also exploring avenues to enable investments in Bitcoin and other digital assets through national pension funds and cryptocurrency investment strategies. These initiatives align with broader objectives to position South Korea as a leader in responsible crypto innovation.

Central Bank Caution

Despite the Democratic Party’s enthusiasm, the Bank of Korea has expressed concerns. Governor Rhee Chang-yong remarked that allowing non-bank entities to issue stablecoins could disrupt monetary policy. He emphasized the need for vigilant oversight by central banks regarding the issuance of digital currencies, particularly in light of the 2022 Terra crash that significantly eroded investor trust.

The central bank advocates for careful implementation and a clear division of responsibilities between public and private sectors in managing digital currency.

A Comparative Approach

The Digital Asset Basic Act in South Korea presents a different approach compared to crypto regulations in other nations, such as the United States. The U.S. emphasizes issuer size and consumer protection through frameworks like the GENIUS Act, while in South Korea, the Financial Services Commission is responsible for oversight, focusing on reserve requirements and institutional regulation.

Although South Korea’s framework may lack certain consumer protections offered by U.S. proposals, it illustrates the country’s intent to incorporate digital assets into the mainstream economy while minimizing systemic risks.

Looking Ahead

The National Assembly will now review the bill in committee and make any necessary adjustments. The Democratic Party has established a Digital Asset Committee that collaborates with financial and regulatory bodies to enhance the proposed legislation.

If enacted, the Digital Asset Basic Act will be a significant milestone for South Korea’s burgeoning crypto market, setting a precedent for responsible innovation and aligning the nation’s regulations with international standards.

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