South Korea Moves to Legalize Stablecoins with New Crypto Bill

South Korea has taken a significant step towards integrating stablecoins into its financial system with the introduction of a new crypto bill. The proposed legislation aims to legalize the issuance of stablecoins and establish a presidential committee to guide crypto policy. This move is part of a broader effort to regulate the crypto industry and promote the use of digital assets.

The Digital Asset Basic Act, which is expected to be introduced by lawmaker Min, includes provisions for legalizing and overseeing won-pegged stablecoins. This legislation will require strict licensing for stablecoin issuers, signaling a major step toward legalizing won-backed stablecoins. The bill also proposes the establishment of a presidential committee to oversee crypto policy, ensuring that the regulatory framework is comprehensive and effective.

The legalization of stablecoins in South Korea is expected to have several implications for the crypto industry. Stablecoins, which are digital assets pegged to the value of a stable asset like the South Korean won, provide a stable store of value and a medium of exchange. This stability makes them attractive for use in transactions and as a hedge against the volatility of other cryptocurrencies.

The introduction of the Digital Asset Basic Act is a response to the growing demand for stablecoins in South Korea. The country has seen a surge in interest in cryptocurrencies, and stablecoins offer a way to participate in the crypto market without the risk of price fluctuations. The legalization of stablecoins will also provide a regulatory framework for their issuance and use, ensuring that they are issued by licensed entities and comply with anti-money laundering and know-your-customer regulations.

The establishment of a presidential committee to guide crypto policy is a significant development in South Korea's approach to regulating the crypto industry. The committee will be responsible for developing and implementing policies that promote the use of digital assets while protecting consumers and ensuring the stability of the financial system. This approach is in line with the government's broader efforts to promote innovation in the financial sector while maintaining regulatory oversight.

The legalization of stablecoins in South Korea is expected to have a positive impact on the crypto industry. It will provide a regulatory framework for the issuance and use of stablecoins, ensuring that they are issued by licensed entities and comply with anti-money laundering and know-your-customer regulations. This will help to build trust in the crypto industry and promote its use as a medium of exchange and a store of value. Additionally, the establishment of a presidential committee to guide crypto policy will ensure that the regulatory framework is comprehensive and effective, promoting the use of digital assets while protecting consumers and ensuring the stability of the financial system.

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. South Korean stablecoin trading is surging with transactions involving the leading US dollar stablecoins reaching 57 trillion won on five main domestic exchanges in the first quarter. 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 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. “We need to establish a won-backed stablecoin market to prevent national wealth from leaking overseas,” he said during a policy discussion.

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.