South Korea’s Digital Asset Basic Act faces delay following stablecoin disputes

South Korea’s Digital Asset Basic Act is facing delays as unresolved disagreements over stablecoin oversight and governance continue to divide key financial authorities.

While the proposed legislation is expected to introduce wide-ranging investor protection measures, officials now claim that formal submission is unlikely to occur until the new year.

Digital Asset Basic Act faces submission delay

The Phase 2 Virtual Asset Bill, officially known as the Basic Digital Asset Act, is currently under review by the Financial Services Commission (FSC).

As officials in the financial sector and the National Assembly claim, the draft law will strengthen investor protection in digital assets by providing no-fault compensation provisions and imposing strict liability on digital asset operators in cases of system failures or security breaches.

The bill has one of its pillars centered on stablecoins. Within the proposed scheme, stablecoin issuers will be required to back issued tokens entirely with reserve assets, in the form of bank deposits or government bonds. The balance issued must be deposited in banks or other approved custodians at a minimum of 100%.

The bill can also impose financial-industry-level standards on digital asset businesses. These include additional disclosure requirements, standard terms and conditions, and more stringent advertising requirements under the Electronic Financial Transactions Act. Moreover, digital asset operators can be held strictly liable for losses caused by hacking attempts or technical failures.

Stablecoin disputes stall progress

Although there is a wide consensus on the general framework of the legislation, the controversies regarding the issuance of stablecoins have slowed its completion. The Bank of Korea has assumed the role that, to secure the stability of operations and regulatory control, only consortium structures where banks have at least a 51% majority stake would be allowed to issue stablecoins.

Conversely, the FSC has objected that requiring a legal limit on bank participation might restrict innovation, as technology firms would be discouraged from participating. Another difference between the two institutions is the presence of a distinct consensus body during the approval of the stablecoin.

Although the central bank advocates a unanimous agreement system incorporating various agencies, the FSC claims that the current administrative systems are adequate in terms of coordination, as the Bank of Korea and the Ministry of Strategy and Finance are ex officio members of these systems.

Other unresolved questions include the initial capital requirement for stablecoin issuers, which has been proposed to range from 500 million won to 25 billion won, and whether the issuance and distribution of stablecoins should be structurally differentiated from those of cryptocurrency exchanges.

According to an FSC official, the authorities are still discussing options with other agencies and assessing all available options. Nevertheless, the submission of the bill has been postponed to next year as certain issues are yet to be negotiated.

Consequently, the ruling party’s Digital Asset Task Force is reportedly drafting an alternative proposal using the existing bills tabled by politicians.

Political controversy adds pressure

The slowdown in legislation is accompanied by an increase in political attention to the crypto market in South Korea. Kim Byung-ki, the floor leader of the ruling Democratic Party, is under pressure to step down after he was accused of ordering the criticism of the largest crypto exchange in the country, Upbit. Meanwhile, his son got an internship at competitor Bithumb.

One of his assistants revealed to local media that Kim asked his employees to ask aggressive questions against Upbit and Dunamu at National Assembly meetings. These allegations emerged following reports that Kim’s son was employed by Bithumb’s data analysis team soon after Kim had a secret meeting with the exchange.

Kim subsequently released a statement criticizing what he described as monopoly conditions in the domestic crypto market and citing regulatory infractions found at one of the exchanges.

According to regulatory data, Upbit held a market share of approximately 72% in the domestic market during the first half of 2025. Kim has refused to acknowledge any misbehavior and stated that his remarks were based on his general feelings about market concentration and had nothing to do with his son’s employment.

The smartest crypto minds already read our newsletter. Want in? Join them.