South Korea”s journey toward a comprehensive regulatory framework for cryptocurrencies has hit a significant roadblock, with new legislation now expected in 2026. This delay stems from ongoing disagreements among regulators regarding the issuance of stablecoins, a critical element in the digital asset ecosystem.
The Financial Services Commission (FSC) is currently working on the Digital Asset Basic Act, which aims to impose stringent rules for stablecoin issuers. Notably, the proposed regulations would mandate that issuers maintain 100% of their reserves either in bank deposits or government bonds, with these assets held by licensed custodians. The objective is to safeguard investors against potential losses in the event of an issuer”s collapse, a concern heightened by past market failures linked to inadequately backed digital assets.
While there is a consensus among regulators on the need for robust investor protection measures, the debate over who should be permitted to issue stablecoins remains contentious. The Bank of Korea advocates a model in which only bank-controlled consortia can issue stablecoins, asserting that this would preserve monetary stability and mitigate systemic risks. Conversely, the FSC has expressed reservations about imposing rigid ownership requirements, fearing that such restrictions could stifle technological innovation and hinder the growth of digital finance.
Another point of contention is governance. The Bank of Korea proposes the establishment of a new licensing body dedicated to overseeing stablecoin activities, while the FSC argues that this is unnecessary given its existing regulatory framework, which already collaborates with the central bank and the Ministry of Economy and Finance.
In addition to stablecoin regulations, the draft law aims to elevate compliance standards across the cryptocurrency sector. Digital asset service providers would face new disclosure obligations, advertising limitations, and customer protection measures, drawing parallels to traditional financial practices. Furthermore, the bill could potentially revive opportunities for domestic token fundraising, with initial coin offerings (ICOs) possibly returning under strict guidelines after being banned since 2017.
In related developments, South Korean payments giant BC Card has recently concluded a pilot project allowing foreign users to transact with local merchants using stablecoins. This initiative signals preparations for a broader stablecoin payment infrastructure.
As the regulatory landscape evolves, the ongoing stalemate over stablecoin issuance illustrates the broader challenges faced in harmonizing innovation with regulatory oversight in the cryptocurrency space.
