South Korea Proposes 500 Million Won Capital Requirement for Stablecoin Issuers

A South Korean lawmaker has introduced a new bill aimed at establishing a comprehensive regulatory framework for the cryptocurrency industry, with a particular focus on stablecoins. The Digital Asset Basic Act, proposed by Min Byeong-deok of the ruling democratic party, seeks to build upon the existing Virtual Asset Investor Protection Act, which came into effect in July 2024. This new legislation aims to create a structured and comprehensive framework for the local digital asset ecosystem, going beyond the safety net provided for investors by the previous law.

The bill includes a key component: the adoption of a licensing regime for stablecoin issuers. This regime requires issuers to have over 500 million Korean won ($367,890) in owner's capital, aligning with President Lee Jae-myung's promise to promote a Korean won-based stablecoin market. This move is intended to prevent the outflow of domestic capital through stablecoins based on other currencies. Min, who was the head of the digital asset committee under President Lee's election campaign, emphasized the importance of this regulatory step.

Stablecoin regulations have been gaining traction globally, with other regions like the U.S. and Hong Kong also implementing similar measures. The U.S. has been pushing for the Genius Act, while Hong Kong's legislative body has passed a stablecoin bill mandating licensing for issuers. Min cited examples from the U.S., EU, and Japan, noting that their frameworks encompass a broader set of rules for the issuance, circulation, and trading of crypto assets.

Beyond stablecoins, the Digital Asset Basic Act aims to legally define digital assets and their application to service providers. It also proposes the creation of a Digital Asset Committee directly overseen by the president. Additionally, the bill seeks to establish a legal basis for penalizing unfair practices in the crypto market, further solidifying the regulatory framework for digital assets in South Korea.

The proposed bill is significant as it represents one of the most comprehensive regulatory efforts for stablecoins in the region. It reflects a growing trend among governments to establish clear guidelines for the use and issuance of stablecoins, as well as other cryptocurrencies. This trend is driven by the need to balance innovation with consumer protection and financial stability. The licensing regime for stablecoins is expected to have a significant impact on the cryptocurrency market in South Korea, leading to increased transparency and accountability among stablecoin issuers, as well as greater consumer confidence in the use of stablecoins. However, it may also result in higher costs for issuers, who will need to comply with the new regulatory requirements.

The proposed bill is still in the early stages of the legislative process, and it remains to be seen whether it will be passed into law. However, the fact that it has been proposed by a lawmaker indicates a growing recognition of the need for regulation in the cryptocurrency market. As the bill progresses through the legislative process, it will be closely watched by industry stakeholders and regulators alike.