South Korea Moves to Regulate Stablecoins with New Digital Asset Act

South Korea is on the brink of a significant shift in its cryptocurrency landscape with the introduction of a new regulatory framework backed by President Lee Jae-myung. The proposed Digital Asset Basic Act, introduced by ruling party lawmaker Min Byeong-deok, outlines a licensing system for stablecoin issuers, requiring projects to hold at least 500 million Korean won in capital. This move is seen as a step towards a regulated and scalable stablecoin ecosystem fully backed by the Korean won, aligning with President Lee's strong support for local innovation and tighter security for users.

For crypto users, this development means that South Korean won-based stablecoins could soon become a legitimate alternative to USDT and USDC, particularly for on-chain activities without forex risk or capital flight issues. The bill also proposes a legal definition for all digital assets and introduces a presidentially overseen Digital Asset Committee, marking a significant shift towards a mature and clearly regulated market. This is expected to benefit developers, DeFi protocols, and exchanges operating in Korea or looking to enter the market.

If passed, the law could also crack down on insider trading, pump-and-dump schemes, and rug pulls, offering users more confidence and transparency. The bill was inspired by frameworks already in place in other regions, including the licensing requirements for stablecoin issuers. With other nations moving fast in the crypto space, South Korea is positioning itself to keep pace with global developments.

In parallel, Kakao-backed blockchain Kaia has pledged to launch a Korean won-pegged stablecoin, aligning with President Lee's crypto-friendly agenda. Kaia's move is significant due to its deep ties with Kakao's massive digital ecosystem, including Kakao Pay. This development comes amid a broader push to support private stablecoin issuers under the upcoming Digital Asset Basic Act, indicating strong legislative support for the plan.

Despite legal hurdles, such as the constitutional authority of the Bank of Korea over currency issuance, President Lee's administration is leaning towards private-sector innovation. Lawmaker Min Byoung-dug, who leads the party’s Digital Asset Committee, has signaled support for private-issued stablecoins. The new administration's crypto-friendly stance has been met with enthusiasm from both traditional and crypto investors, with a survey revealing that almost 60% of respondents plan to expand their crypto holdings under Lee’s tenure.

This optimism is reflected in the stock market, where payment firms Kakao Pay and rival Danal both closed the day up significantly. The regulatory framework proposed by President Lee's administration is a significant step towards integrating digital assets into the national financial system. The legalization of stablecoins and the support for private-sector innovation indicate a forward-thinking approach to cryptocurrency regulation. As the country moves towards a more crypto-friendly environment, it is expected that the issuance of stablecoins will become a reality, benefiting both local companies and investors.