XRP News Today: South Korea Delays Stablecoin Bill as Central Bank Clashes Over Control

South Korea's financial regulator missed a government-imposed deadline to submit a proposed stablecoin regulation bill, signaling growing tensions in the government's efforts to create a legal framework for digital assets. The Financial Services Commission (FSC) cited the need for additional time to coordinate with relevant agencies, delaying the submission until the end of this month or early next month according to reports. The missed deadline comes amid rising political pressure from the ruling Democratic Party, which has committed to introducing the bill by the end of January 2026 as reported.

The FSC announced it will instead reveal the terms of the proposed bill under the tentative name Basic Digital Asset Act, which lawmakers had requested by December 10. The regulator defended the delay by explaining that the extended coordination period was necessary to ensure alignment with the broader policy goals of the government according to the FSC. This move reflects the government's intent to balance rapid innovation with regulatory oversight in the digital asset sector.

In the absence of a clear regulatory framework, the South Korean crypto market remains in a legal gray area, with all forms of cryptocurrency and stablecoin issuance currently prohibited. The government, however, is pushing for legal clarity to enable local companies to issue won-pegged stablecoins, aligning with global trends and positioning South Korea as a competitive player in the fast-evolving crypto market according to financial analysts.

Why the Standoff Happened

The delay in drafting the stablecoin bill has intensified the debate between the FSC and the Bank of Korea (BOK), with the central bank seeking a veto over stablecoin issuance and greater regulatory oversight. The BOK has raised concerns that allowing big tech firms to issue their own stablecoins could undermine its control over monetary policy and weaken the won's stability according to BOK officials. The FSC, on the other hand, has resisted centralized control, pointing to global examples such as the EU and Japan, where fintech companies-not banks-predominate in stablecoin issuance according to industry experts.

The FSC has proposed a compromise in which only consortia with domestic banks holding a 51% or higher stake would be allowed to issue stablecoins. While this middle ground might satisfy some of the BOK's concerns, it has not been accepted by the FSC, which argues that it could limit the participation of innovative fintech and tech firms according to FSC officials. This fundamental disagreement reflects a broader ideological clash over the direction of crypto policy in South Korea.

How Markets Reacted

Despite the regulatory uncertainty, the private sector is showing strong interest in stablecoin adoption. A recent partnership between Ripple Labs and South Korean firms like Lean Ventures and VivoPower International highlights the potential for cross-border digital asset investments. This deal involves a $300 million fund targeting Ripple shares and is seen as a strategic move to tap into the growing demand for XRP-linked assets in South Korea according to market analysts.

Meanwhile, the government has announced a significant shift in policy that could further stimulate the market. As of September 16, crypto trading and brokerage firms are now eligible for venture company status under the revised Venture Business Act. This change offers access to tax incentives and state-backed financing, signaling a clear move to support the digital asset industry according to government sources. The shift is part of a broader effort to align South Korea's regulatory framework with global standards and enhance its competitiveness in the global crypto market.

Risks to the Outlook

The absence of clear regulatory guidelines has already begun to impact investor confidence. The recent breach at Upbit, South Korea's largest crypto exchange, exposed vulnerabilities in the current oversight system and raised questions about the government's ability to protect consumer assets. The incident, in which $30.1 million in Solana-based tokens were stolen, has led to calls for stricter security requirements and financial penalties for exchanges failing to meet them according to security experts.

In response, the FSC is considering rules that would impose no-fault liability on crypto exchanges, requiring them to compensate users for losses caused by hacking or system failures. This model, already used by traditional banks, could significantly increase the financial burden on exchanges and force them to implement stronger risk management practices according to FSC officials. However, critics argue that these measures may also drive investors to offshore exchanges with less stringent rules, undermining the government's goal of fostering a domestic digital asset ecosystem according to industry analysts.

What This Means for Investors

Investors are closely watching the outcome of the stablecoin regulation debate, as it will determine the legal and economic environment for digital asset firms in South Korea. The FSC's proposed framework for won stablecoins includes a 100% reserve requirement, a ban on interest payments, and a mandate for overseas issuers to establish local branches according to regulatory documents. These rules aim to ensure transparency and stability but could also raise the cost of compliance for smaller firms.

For global players like Tether and USDC, the local branch requirement may complicate their ability to operate in the South Korean market. At the same time, the requirement could create opportunities for domestic firms to gain a foothold in the stablecoin space by partnering with foreign entities or establishing their own compliance-focused platforms according to industry reports. The government's goal is to create a regulatory environment that encourages responsible innovation while protecting consumers and maintaining financial stability.