South Korea’s move to modernize its digital asset framework has hit a critical slowdown. There has been a division over how stablecoins should be regulated among policymakers. This has delayed progress and pushed the passage of crypto regulation into next year.
South Korea’s Crypto Regulation Bill Faces Delays
As reported by Yonhap News Agency, the Financial Services Commission (FSC) of the country has continued talks on forming rules regarding digital assets. One of its keen interests lies in investor protection concerning the current surge in stablecoins.
However, the issue of who should be allowed to issue stablecoins is still pending among the regulatory authorities. This is contributing to a slowdown in the drafting of the bill. The country seeks to follow suit in the footsteps of the US, who had passed its GENIUS Act earlier this year.
Behind this delay is an ongoing debate between FSC and the Bank of Korea (BOK) on stablecoin issuance models. Under the plan, stablecoin issuers must back their stablecoins with reserves held by qualified custodians, like banks.
The BOK believes that banks should be the only ones allowed to issue stablecoins as part of a group. They think that banks should own most of this group. Central bank officials say this is important for maintaining stable money and reducing financial risks.
On the other hand, the Financial Services Commission (FSC) has resisted strict rules on ownership. They argue that excluding non-bank tech companies from crypto regulations could limit competition and slow down innovation in digital payments. This is a major challenge in regulating crypto in South Korea
In June, the government signaled support for stablecoin use under the Digital Asset Basic Act before negotiations stalled.
Dispute on Oversight Adds to Policy Stalemate
Another issue left unresolved is whether a committee is needed that specializes in licensing issuers of stablecoins. The BOK favors establishing a special consultative body, but the FSC insists that administrative bodies are enough.
However, as the talks remain inconclusive, the ruling Democratic Party is now preparing their own integrated bill. This will merge several pieces of legislation, led by lawmakers, to end the impasse and ensure crypto regulations remain on the legislative rails.
In addition to stablecoins, the proposed law would improve compliance expectations in the crypto space. Digital asset service providers are expected to meet strict disclosure provisions and are to have enhanced customer protection regulations.
Specifically, the bill may also provide a second chance to domestic initial coin offerings (ICOs). ICOs had been banned in the country since 2017.
The slowdown comes despite the country showing signs of being more open to the crypto industry. In September, South Korea rescinded the ban that prohibited venture capital investment in crypto companies to allow these firms to apply for venture certification.
A month later, Binance completed its acquisition of Gopax, which saw the company officially return to the market after a several-year absence.