South Korea crypto regulation: stablecoin interest payments to be banned under new 2025 law

South Korea’s FSC plans to prohibit interest payments on stablecoins, aiming to protect financial stability while fostering innovation in digital assets, with a new crypto law expected by the end of 2025.

Proposed stablecoin interest ban mirrors U.S. regulations

Financial Services Commission Chairman Lee Eok-Won announced the policy on October 20 during a parliamentary audit at the National Assembly’s Financial Committee, as originally reported by Yonhap News. Under the proposed rules, stablecoin holders will no longer be able to earn yield simply by holding the tokens. The policy aims to maintain financial stability while allowing innovation in digital assets.

The move aligns with the U.S. GENIUS Act, which prohibits stablecoin issuers from offering interest or yield to holders. This legislation aims to distinguish payment stablecoins from traditional bank deposits and prevent potential risks associated with yield-bearing digital assets.

However, it’s worth noting that the GENIUS Act has faced criticism for allowing crypto exchanges to offer rewards on stablecoins, potentially circumventing the interest prohibition. This loophole has raised concerns among U.S. banks about the risk of significant deposit outflows, which could destabilize the financial system.

South Korea crypto law phase 2 to be submitted this year

Additionally, Lee said that banks should lead stablecoin issuance, while fintech companies act only as technical partners, to ensure a clear separation between banking and other financial services. Crypto exchanges will be prohibited from issuing their own stablecoins.

The FSC plans to submit a “phase 2 cryptocurrency law” to the National Assembly before the end of this year. Authorities are reviewing the framework to include sufficient safeguards while enabling the stablecoin market to support payments, remittances, and other financial services, including cross-border transactions. The law will be accompanied by follow-up regulations to ensure swift and effective implementation.