South Korea is moving forward with a significant step in the regulation of digital assets, introducing the “Digital Asset Basic Act” to establish a legal framework for stablecoins. At present, the National Assembly is reviewing a bill designed to oversee stablecoins that have a value pegged to KRW or the US dollar.
The cause for this initiative is the Terra-LUNA crash that happened in 2022 and shook people’s confidence in investing. The government is looking to offer a better and clearer atmosphere for the fast-developing digital asset market.
New Regulations for Issuers
Under the proposed regulations, companies that wish to issue stablecoins must meet certain requirements. A notable change from earlier drafts is the reduced minimum capital requirement of ₩50 million, down from ₩5 billion. Issuers will be required to back their stablecoins with fiat collateral held in reputable Korean banks.
In addition, these companies must provide daily proof of reserves and conduct monthly stress tests to ensure their stability during market downturns. This system is set up to help prevent the volatility of the Terra-LUNA collapse and confirm that stablecoins can be safely and reliably pegged to their backing.
Moreover, issuers of stablecoins will guarantee that redeeming for fiat currency is done within two business days for quick access to funds by traders. The bill also requires the formation of insurance funds that will protect consumers in case of unexpected market happenings.
Expanding South Korea’s Crypto Landscape
The Digital Asset Basic Act is important in boosting South Korea’s crypto sector, as outlined by Lee Jae-myung. Since there are more than 18 Million cryptocurrency traders in South Korea, the purpose of the proposal is to ensure that the trading sector stays protected.
Trading of stablecoins during the first quarter on the top five exchanges reached over ₩57 trillion ($42 billion), proving that more people are attracted to digital currencies.
In addition to supporting stablecoins, Lee’s government is also working towards allowing Bitcoin exchange-traded funds (ETFs) and encouraging the national pension fund to invest in cryptocurrency.
As part of this initiative, major exchanges such as Upbit and Bithumb are already exploring partnerships to launch KRW-pegged stablecoins and USD-based tokens, signaling a move towards regulatory compliance and industry growth.
The country is expected to gain a stronger role in the worldwide crypto market, thanks to the framework this legislation proposes for the future of stablecoins and crypto.
