Introduction
South Korea is about to undergo a regulatory revolution in the crypto space via the development of the Digital Asset Basic Act. The bill is championed by the Democratic Party of President Lee Jae myung, which aims to regulate won pegged stablecoins, improve transparency, and solidify South Korea’s role in global digital finance.
Why South Korea is Embracing Stablecoins
Stablecoins, which are crypto assets linked with fiat currencies, have become widely embedded into South Korea’s popular crypto market. Bank of Korea information indicates that for Q1 2025, U.S. dollar pegged stablecoins have processed vehicle ₩57 trillion (~US 42 billion) transaction volume on domestic exchanges. President Lee has argued that a domestic, won based stablecoin would curb the outflow of capital overseas and maintain the country’s financial sovereignty.
Key Features of the Digital Asset Basic Act
The bill’s centerpiece is a licensing framework for issuing won pegged stablecoins. Key conditions include:
- Equity capital must be a minimum of ₩500 million (~US $368,000).
- The redemptions must have guarantees or other backing, such as reserves.
- FSC approval
- Bankruptcy isolation and strict internal financial controls.
Additional provisions, for licensing digital asset service providers, reporting obligations, and other oversight authorities, are legislated under Presidential oversight.
Institutional Oversight and Structural Controls
The legislation intends to create two new bodies to guide the cryptocurrency sector:
- A Presidential Digital Asset Committee that will develop national policy regarding digital assets.
- A Digital Asset Industry Association that oversees exchange listings, token eligibility and market surveillance.
The two new organizations will coordinate efforts to create a safer and more transparent environment for investors.
Central Bank Voices Concern
Although the action is based on innovation, the Bank of Korea (BOK) is still cautious. “We should be careful about taking over the issuance of stablecoins through private entities. Stablecoins could create a disincentive for monetary policy and also reduce the ability of the central bank to control flow of currency.” Governor Rhee Chang yong stated. The BOK is expected to hold discussions with banking leaders to explore its role in any stablecoin regime.
Market and Industry Response
KakaoPay and other crypto linked shares moved up quickly after the news, with KakaoPay increasing in value by as much as 18% in one day. The main blockchain players, like Kaia (another company backed by Kakao), have made it clear they intend to launch won back stablecoins hoping for rapid adoption and regulatory visibility.
Balancing Innovation with Investor Protection
The Digital Asset Basic Act was established by officials in South Korea to foster trust and avert pitfalls seen in the past. It is crafted around the Virtual Asset Investor Protection Act (2024) with protections against abuses, including insider trading and pump and dump schemes. The Act includes strict licensing, full disclosure, and reserve requirements to provide users with a safer route into crypto.
Final Outlook
As South Korea enters the race to regulate stablecoins with the EU, U.S., and Hong Kong, the Digital Asset Basic Act is a significant stepping stone for digital asset regulation. If the Basic Act is passed, it would allow domestic firms to issue won pegged stablecoins, retain capital inflows in Korea, and establish South Korea as a player in the digital finance sector. However, there are still significant hurdles to overcome including oversight from the Central Bank and technical issues. But for the time being the industry is waiting; we might be about to see the legislation that determines how digital assets might coexist with national currencies and financial systems.
