South Korea’s Stablecoin Ambitions Hit Regulatory Roadblock
South Korea is moving toward one of its most stringent crypto frameworks yet, with a proposed law that would impose bank-grade safeguards on stablecoin issuers.
However, the effort has stalled, as regulators remain locked in a dispute over who should be allowed to issue stablecoins—pushing final legislation into next year.
Key takeaways:
- South Korea plans strict reserve and custody rules for stablecoin issuers
- Issuers may be required to back tokens with bank deposits or government bonds
- Regulators are divided over whether only bank-led entities should issue stablecoins
- The legislative deadlock has delayed the framework into 2026
The proposed rules are part of the Financial Services Commission’s draft Digital Asset Basic Act, which aims to extend investor protections in crypto markets to a level comparable with traditional finance.
Bank-Grade Rules for Stablecoins
Under the draft framework, stablecoin issuers would be required to hold reserve assets exclusively in highly secure instruments, such as bank deposits or government bonds. In addition, one hundred percent of those reserves would need to be entrusted to approved custodians, including commercial banks.
The goal is to prevent a stablecoin issuer’s failure from spilling over into losses for users, effectively isolating customer funds from corporate insolvency risk. Regulators are seeking to close loopholes exposed by past stablecoin collapses, where insufficient or poorly managed reserves amplified investor losses.
Beyond stablecoins, the bill would impose broader obligations on digital asset service providers. These include stricter disclosure requirements, standardized terms of service, and tighter advertising rules. Providers could also be held financially liable for damages resulting from hacks or system failures, even without proven negligence—mirroring liability standards already applied to online retail platforms.
ICOs May Return—Under Tight Conditions
The proposal also opens the door to a conditional return of initial coin offerings. ICOs have been banned in South Korea since 2017, but the new framework would allow domestic projects to launch tokens if they meet rigorous disclosure and risk-management standards.
If implemented, this would mark a significant shift in policy, potentially reviving local token fundraising—albeit under heavy regulatory supervision designed to limit speculation and fraud.
A Regulatory Deadlock at the Core
Despite progress on paper, the most contentious issue remains unresolved: who gets to issue stablecoins. The Bank of Korea has taken a conservative stance, arguing that stablecoin issuance should be restricted to consortia in which banks hold at least a fifty-one percent controlling stake. From the central bank’s perspective, this is essential to preserve monetary stability and reduce systemic risk.
The Financial Services Commission, however, disagrees. It has warned that imposing rigid ownership thresholds would crowd out technology firms, limit competition, and slow innovation in digital finance. The two institutions are also divided on governance, with the Bank of Korea pushing for a new licensing committee, while the FSC argues existing structures are sufficient.
The standoff has delayed the bill’s timeline, prompting South Korea’s ruling Democratic Party to draft a separate proposal that consolidates various lawmaker-led digital asset initiatives.
Stablecoins, Sovereignty, and the Bigger Picture
The debate is unfolding against a broader strategic backdrop. President Lee Jae Myung, elected earlier this year, has made the development of a Korean won-pegged stablecoin ecosystem a policy priority, framing it as a way to protect monetary sovereignty in a market increasingly dominated by U.S. dollar-based stablecoins.
The Digital Asset Basic Act represents the second phase of South Korea’s comprehensive crypto regulatory push. The first phase, passed in 2023 and implemented in 2024, focused on combating market abuse such as insider trading and price manipulation.
Whether South Korea ultimately opts for a bank-centric stablecoin model or a more open issuance framework remains unresolved. What is clear is that the country is positioning itself for a tightly controlled—but potentially influential—role in the next stage of global digital asset regulation.
The information provided in this article is for educational purposes only and does not constitute financial, investment, or trading advice. Coindoo.com does not endorse or recommend any specific investment strategy or cryptocurrency. Always conduct your own research and consult with a licensed financial advisor before making any investment decisions.
Alex is Editor-in-Chief of Coindoo and co-founder of Millennial Media Group, with nearly a decade of experience covering financial markets - crypto first, then everything else. It started in 2016 with Bitcoin. Like most people at the time, he didn't fully understand it - so he kept digging. Blockchain, tokenomics, the projects, the cycles. That curiosity never stopped, and eventually pulled him into traditional markets too: equities, commodities, macro. Not because he left crypto behind, but because you can't properly understand one without the other. What drives him is straightforward: he wants to know why something is happening, not just that it's happening. Most market coverage stops at the headline - price up, price down, here's a chart. Alex finds that kind of reporting actively unhelpful. If you walk away from an article without understanding the mechanism behind the move, what did you actually learn? He holds a degree in Tourism from New Bulgarian University - not the most obvious path into financial markets, but markets have a way of pulling in people who are simply too curious to stay out. He has authored over 200 in-depth analyses and more than 10,000 articles across crypto and traditional finance. He still thinks every day in markets teaches him something new. That's probably why he hasn't stopped.
