The Digital Asset Basic Act: Proposed in South Korea

South Korea has one of the most active digital asset markets in the world. To bring order to this market, the ruling Democratic Party of Korea (DPK) proposed the Digital Asset Basic Act. This law aims to create clear rules for digital assets, including how they are issued, traded, held, and supervised. The proposal was first introduced in 2025 and updated in 2026. It serves as a major step to move from limited rules to a full legal framework.

What the Act Covers

The Act defines digital assets in a broad way. It includes assets with economic value that use digital ledgers and can be transferred electronically. It separates them into general digital assets, such as regular cryptocurrencies, and asset-linked ones like stablecoins. Stablecoins keep a steady value because they are tied to real money, such as the Korean won, or other real-world assets.

A key part of the Act sets rules for stablecoins. Issuers must get official approval. They need to hold enough reserves to back the coins fully. They also need a set amount of capital, often at least KRW 500 million (around USD 360,000). They must have clear plans to repay users and strong systems for safety and refunds. These rules are similar to those for banks to protect users if something goes wrong.

The law would require licensing for virtual asset service providers (VASPs). This covers exchanges, custody services, brokers, and issuers. Companies would need to meet standards for capital, operations, cybersecurity, and anti-money laundering. There are also rules against unfair practices like market manipulation and insider trading. Disclosures would help users understand risks and operations better.

Goals and Expected Benefits

The main goal is investor protection. South Korea already has rules focused on user safety from earlier laws. This new Act adds a wider structure that covers issuance and market conduct. It aims to reduce fraud, increase trust, and support fair trading.

Policymakers see digital assets as a link between the real economy and financial markets. The Act seeks to help South Korea lead in digital finance globally. It supports innovation while keeping risks under control. For example, it prepares the way for Korean won stablecoins and possibly spot exchange-traded funds. Major banks and companies are already preparing by forming groups to issue stablecoins.

The proposal also calls for a digital asset committee to coordinate policy and create national plans. This would bring different government bodies together for consistent oversight. It may shift some authority from the central bank to the Financial Services Commission (FSC) for certain areas.

Main Issues and Debates

One big debate is who can issue stablecoins. The central bank wanted banks to hold a majority stake (over 50%) for safety and to protect money policy. The FSC worried this could limit new ideas. The proposed Act tries to balance these views with strict standards that any qualified company can meet, though banks may still play a large role.

Another issue is foreign stablecoins like USDT or USDC. The Act takes a strict approach. Foreign issuers may need to set up a local branch or subsidiary and get a Korean license. This would make them follow the same rules as local companies. Other ideas in earlier proposals were less strict, but the current direction favors strong local control.

There are also talks about ownership limits for exchanges. Ideas include a 20% cap on major shareholders, with some exceptions. This aims to prevent too much control by one party and improve governance.

Implementation will take time. After the law passes, officials need to write detailed rules and enforcement steps. Full effect may come around 2027. This gives businesses time to prepare but also creates some short-term uncertainty.

Analysis and Possible Effects

The Digital Asset Basic Act is a careful but forward-looking law. It learns from other places, such as the EU’s MiCA rules, while fitting South Korea’s needs. Strong reserve and licensing requirements should lower risks of loss or fraud, which builds confidence for everyday users and big investors.

On the positive side, clear rules can bring more institutional money into the market. Banks and traditional finance firms may join more openly. Innovation in payments and real-world asset tokenization could grow. South Korea could become a stronger player in Asia’s digital finance.

Challenges remain. Strict rules might raise costs for smaller companies and slow some new projects. Limits on foreign coins could reduce choices for users in the short term. Finding the right balance between safety and growth will be important during final talks and rule-making.

Overall, the Act marks a shift. South Korea moves from reacting to market events toward shaping a safe and modern digital asset system. If done well, it can protect users, support innovation, and strengthen the country’s position in global finance. Success will depend on good details in the final law and how fairly it is enforced.

Sources:

1. CoinDesk. South Korea Proposes Cryptocurrency Law with Bank-Style Rules for Stablecoins. https://www.coindesk.com/policy/2026/04/08/south-korea-proposes-cryptocurrency-law-with-bank-style-rules-for-stablecoins

2. CoinGeek. South Korea Draft Crypto Bill Covers Stablecoins, RWAs. https://coingeek.com/south-korea-draft-crypto-bill-covers-stablecoins-rwas/

3. Law.asia. Korea Stablecoin Regulation Framework. https://law.asia/korea-stablecoin-regulation-framework/