South Korea's Stablecoin Deadline Sparks Bank-Fintech Regulatory Tug-of-War

South Korea's ruling party has set a firm December 10 deadline for the government to submit a draft stablecoin regulatory framework, warning that lawmakers will act independently if regulators fail to meet the timeline. The move reflects growing urgency to formalize a bank-led consortium model for issuing won-pegged stablecoins, a framework that balances monetary stability concerns with fintech innovation according to reports. The legislation, part of the broader Digital Asset Basic Act, aims to establish a "Korean-style stablecoin" system by January 2026, with banks required to hold at least 51% equity in issuing entities to mitigate systemic risks as financial analysis shows. This structure addresses long-standing concerns from the Bank of Korea (BOK), which has consistently argued that non-bank issuers could destabilize the monetary system by replicating deposit-like activities without equivalent safeguards. The debate over stablecoin governance has intensified as South Korea seeks to align with global regulatory trends. The U.S., EU, and Japan formalized stablecoin frameworks in 2025, prompting South Korean officials to accelerate their efforts to avoid falling behind. The proposed consortium model allows technology firms to participate as minority stakeholders, fostering innovation while ensuring financial oversight. However, disagreements persist between the Financial Services Commission (FSC), which advocates for lower barriers to fintech entry, and the BOK, which emphasizes strict bank dominance. The December 10 deadline emerged during a closed-door consultation between lawmakers and financial regulators, where Kang Joon-hyun, a key Democratic Party figure, reiterated that failure to deliver the draft would trigger a legislator-initiated bill. This ultimatum underscores the political stakes, as the ruling party aims to pass the legislation during an extraordinary National Assembly session in January 2026 according to official statements. The FSC has acknowledged ongoing discussions but clarified that no final decision has been made on the consortium structure. Beyond stablecoin issuance, the regulatory push includes broader financial reforms. South Korea plans to expand anti-money laundering (AML) rules to cover all crypto transactions, including those under 1 million won ($680), to close loopholes for illicit activity. The Financial Intelligence Unit (FIU) is also preparing updated AML guidelines for stablecoin issuers, aligning with international standards. These measures aim to professionalize the crypto sector, requiring virtual asset service providers to meet stricter reserve, compliance, and operational infrastructure standards. The urgency is compounded by market dynamics. While U.S.-dollar stablecoins like USDT and USDC dominate global volumes, South Korean firms such as Naver Financial and KakaoBank are advancing domestic stablecoin projects, signaling corporate demand for localized digital assets. Regulators hope the new framework will foster a competitive ecosystem without compromising monetary sovereignty. As the deadline approaches, the government faces mounting pressure to resolve lingering disputes. A balanced approach is critical: excessive bank control could stifle innovation, while lax oversight risks financial instability. The outcome will shape South Korea's position in the global digital asset landscape, determining whether it emerges as a regulatory leader or lags behind early adopters.