South Korea Legalizes Stablecoins Issuance With New Bill

South Korea has taken a significant step towards embracing stablecoins by proposing a new bill that legalizes their issuance. This move is part of a broader effort to establish a more comprehensive regulatory framework for cryptocurrencies in the country. The proposed legislation includes the creation of a presidential committee tasked with guiding crypto policy, which will play a crucial role in shaping the future of digital assets in South Korea.

The legalization of stablecoins is expected to bring several benefits to the South Korean economy. Stablecoins, which are cryptocurrencies pegged to the value of a stable asset such as the U.S. dollar or the South Korean won, offer a more stable store of value compared to other cryptocurrencies. This stability makes them an attractive option for both investors and businesses looking to hedge against market volatility. Additionally, stablecoins can facilitate faster and cheaper cross-border transactions, which is particularly beneficial for a country like South Korea that has a significant amount of trade and investment with other nations.

The proposed bill also aims to address some of the regulatory challenges associated with cryptocurrencies. By establishing clear guidelines for the issuance and use of stablecoins, the South Korean government hopes to create a more transparent and secure environment for digital asset transactions. This, in turn, could attract more investors and businesses to the country, further boosting its position as a global leader in the crypto industry.

The move to legalize stablecoins comes at a time when South Korea is already making significant strides in the crypto space. The country has been at the forefront of blockchain technology adoption, with several major companies and financial institutions exploring the use of blockchain for various applications. The legalization of stablecoins is expected to further accelerate this trend, as more businesses and individuals look to leverage the benefits of digital assets.

The proposed bill has been met with mixed reactions from industry experts. Some have praised the move as a positive step towards creating a more robust and transparent crypto ecosystem in South Korea. Others, however, have expressed concerns about the potential risks associated with stablecoins, such as the possibility of runs on the stablecoin issuer if the peg to the underlying asset is broken. Despite these concerns, the overall sentiment towards the proposed bill appears to be positive, with many industry players welcoming the move as a step in the right direction.

The creation of a presidential committee to guide crypto policy is also seen as a positive development. This committee will be responsible for overseeing the implementation of the new regulations and ensuring that they are enforced effectively. The committee will also play a key role in promoting the use of blockchain technology and digital assets in South Korea, helping to position the country as a global leader in the crypto industry.

South Korea’s newly elected president Lee Jae-myung is fast-tracking his campaign promise to allow the issuance of domestic stablecoins, as his party has moved forward with a crypto bill. Lee’s ruling Democratic Party proposed the Digital Asset Basic Act, aimed at improving transparency and encouraging crypto sector competition. The bill stipulates that local companies can issue stablecoins with a minimum equity capital of 500 million won. They must also guarantee refunds through reserves and get regulatory approval from the Financial Services Commission, the country’s finance regulator.

Lee has also promised to launch a stablecoin and legalize crypto funds in the country. The new legislation is expected to bolster such trades and boost one of the region’s largest crypto markets, with more than a third of the population, or around 18 million people, reportedly participating. Lee works to fulfill election promises. South Korea’s opposition leader Lee was sworn in as president following a decisive snap election victory. In addition to his plans for a local currency stablecoin, Lee also advocated for South Korea’s national pension fund to invest in Bitcoin and crypto, in addition to pledges to permit the launch of Bitcoin exchange-traded funds in the country.

Lee’s crypto ambitions are facing central bank opposition, with Bank of Korea Governor Rhee Chang-yong warning that non-bank stablecoins could weaken monetary policy effectiveness. The central bank argued that it should take the lead in regulating a local currency stablecoin. South Korean investors could still be burned from their investments in the multibillion-dollar Terra blockchain and its algorithmic stablecoin that was co-created by local Do Kwon, which collapsed in May 2022.