South Korea Proposes Digital Asset Basic Act for Crypto Regulation

South Korea is on the verge of introducing a significant legislative proposal aimed at establishing a comprehensive regulatory framework for cryptocurrencies and related digital assets. The Digital Asset Basic Act, initiated by lawmaker Min Byoung-dug, is designed to enhance market integrity, investor protection, and operational transparency within the crypto ecosystem. This bill, introduced on June 10, represents a pivotal moment in South Korea’s efforts to align with global regulatory trends while addressing unique domestic challenges.

The Digital Asset Basic Act is set to regulate cryptocurrencies, stablecoins, and service providers, fostering transparency and investor protection in a rapidly growing market. The proposed legislation includes the establishment of a Presidential Committee on Digital Assets, which will coordinate regulatory efforts and ensure cohesive policy implementation across government agencies. This committee will play a crucial role in overseeing the compliance and operational standards of digital asset service providers (DASPs), including exchanges and wallet operators.

One of the key provisions of the bill is the mandatory compliance requirements for DASPs, which include strict adherence to anti-money laundering (AML) and know-your-customer (KYC) protocols. Additionally, the bill introduces a licensing system for token issuers to increase accountability and transparency, thereby reducing the risk of fraudulent activities. The legislation also explicitly bans unfair trading practices such as insider trading and market manipulation, aligning crypto market regulations with those governing traditional financial markets.

Recognizing the growing prominence of stablecoins in the digital economy, the bill imposes stringent requirements on stablecoin issuers. These requirements include obtaining approval from the Financial Services Commission (FSC) and maintaining a minimum capital reserve of 500 million won (approximately $369,400 USD). Such measures are designed to ensure stablecoins maintain their peg and reduce systemic risks, reflecting lessons learned from previous market disruptions involving stablecoin volatility.

The regulatory clarity brought by the Digital Asset Basic Act is expected to have a profound impact on market participants. While compliance obligations will increase, the framework is likely to enhance investor confidence and attract institutional investment by reducing regulatory uncertainty. The creation of an industry-led self-regulatory organization will further support market discipline by overseeing token listings and enforcing compliance standards. This collaborative approach between regulators and industry stakeholders is poised to strengthen South Korea’s position as a leading digital asset hub.

Following its introduction on June 10, the bill will undergo rigorous scrutiny within the National Assembly, including debates and potential amendments. Stakeholders across the crypto ecosystem will be closely monitoring the legislative process, as the final provisions will shape the operational landscape for years to come. The bill’s progress will also serve as an important reference point for other jurisdictions seeking to balance innovation with regulatory oversight in the evolving digital asset space.

The Digital Asset Basic Act proposed by South Korean lawmakers marks a decisive step toward a regulated and transparent digital asset market. By addressing key areas such as service provider compliance, token issuer licensing, stablecoin regulation, and market fairness, the bill aims to foster a secure environment conducive to sustainable growth. As the legislative process unfolds, market participants should stay informed and prepared to adapt to the new regulatory standards that will define South Korea’s crypto future.