South Korea’s cryptocurrency regulation has hit a deadlock. A long-awaited digital asset bill designed to introduce strict rules for stablecoins and other crypto services is unlikely to pass this year. The delay stems from a dispute between key institutions over which entities should be allowed to issue these digital currencies.

According to a report by Yonhap, the Digital Asset Basic Act drafted by the Financial Services Commission (FSC) has been postponed until at least next year.

Strict reserve and liability requirements

The proposed legislation would significantly tighten requirements for stablecoin issuers. Under the draft, reserves would have to be held exclusively in bank deposits or government bonds, with 100% of reserve assets entrusted to independent custodians such as banks.

The aim is to prevent scenarios in which an issuer’s bankruptcy could endanger investors — a risk highlighted by several high-profile crypto collapses in recent years.

The law would also impose new obligations on crypto service providers, including stricter disclosure rules, standardized business terms, and tighter advertising regulations. In the event of hacks or technical failures, providers could be held liable for damages regardless of fault.

Who gets to issue stablecoins?

The core dispute centers on who should be authorized to issue stablecoins. The Bank of Korea argues that issuers should be limited to entities in which banks hold at least a 51% stake, citing financial stability concerns.

The FSC opposes this approach, warning that rigid ownership thresholds would exclude technology firms and stifle innovation in the crypto sector. Regulators, it argues, should adopt a more flexible framework rather than restricting issuance to traditional financial institutions.

Disagreement also extends to licensing. While the Bank of Korea favors creating a new supervisory body for stablecoin issuers, the FSC considers this unnecessary, noting that it already functions as the legally mandated authority with representation from both the central bank and the finance ministry.

Political response and presidential priorities

The political arena has also weighed in. The ruling Democratic Party is preparing its own bill to consolidate various legislative initiatives on digital assets.

Stablecoins have become a politically charged issue following the election of President Lee Jae Myung, who has made the development of won-pegged stablecoins a policy priority. His stated goal is to safeguard monetary sovereignty at a time when U.S. dollar-linked stablecoins dominate global markets.

The second pillar of crypto regulation

The Digital Asset Basic Act represents the second phase of South Korea’s broader crypto regulatory framework. The first package, passed in July 2023 and implemented a year later, focuses on curbing market manipulation and insider trading.

Whether South Korea can balance investor protection with innovation remains uncertain. What is clear, however, is that comprehensive stablecoin regulation is coming — just more slowly than policymakers initially envisioned.

Sources:

https://www.yna.co.kr/view/AKR20251229154700002?section=market-plus/cryptocurrency

https://www.theblock.co/post/383938/south-koreas-stablecoin-framework-deadlock