In the realm of cryptocurrency and digital assets, the political landscape is heating up in South Korea. The Democratic Party of Korea (DPK) and the People Power Party (PPP) have introduced competing legislative measures aimed at regulating stablecoins, highlighting the urgency to address cryptocurrency challenges.
The Legislative Showdown
The recent proposals from South Korea’s political parties mark a pivotal moment in the regulation of digital currencies. With a focus on establishing a necessary framework for stablecoins tied to the Korean Won (KRW), the DPK and PPP are revealing differing visions.
Ahn Do-gil from the DPK is advocating for the “Act on the Issuance and Distribution of Value-Stable Digital Assets.” On the flip side, PPP’s Kim Eun-hye has introduced the “Act on Payment Innovation Using Value-Fixed Digital Assets.”
Reports suggest that a significant aspect of both proposals includes the regulation of stablecoins by the Financial Services Commission (FSC). This oversight will empower the FSC to manage issuance protocols, distribution strategies, and potential redemption processes to mitigate market instability.
Furthermore, a requirement for stablecoin issuers to present a comprehensive white paper detailing the parameters of their digital assets—including issuance limits, distribution mechanisms, and reserve asset structures—has been stipulated in both bills.
In a notable provision, the Ministry of Economy and Finance, along with the Bank of Korea (BOK), will have the authority to request data from the FSC and carry out inspections to ensure stability in the foreign exchange market.
The DPK is also suggesting the formation of a “Value Stability Digital Asset Committee,” which would include key financial authorities to collaboratively shape policies related to stablecoins.
Despite shared features, the bills diverge significantly regarding interest payments on stablecoins. The PPP’s proposal supports interest payments, framing it as a potential incentive for overseas adoption of KRW-pegged stablecoins. In contrast, the DPK’s stance prohibits interest payments, emphasizing market integrity.
Industry experts have expressed the need for a distinct regulatory approach to Korean stablecoins, suggesting that blanket prohibitions on interest might not be suitable given the unique dynamics of the South Korean market.
The Push for Comprehensive Regulation
With stablecoins gaining traction, DPK member Min Byeong-deok is driving a push for more extensive legislation intended to encapsulate a structured regulatory environment for all crypto assets.
Concerns from the BOK Governor, Lee Chang-yong, center around non-bank entities possibly issuing stablecoins linked to the KRW, which he warns could lead to confusion in monetary and foreign exchange policies.
As officials navigate these complexities, Korean banks are reportedly considering dual paths for regulatory compliance, preparing for the uncertain status of non-bank stablecoin issuers.
In a progressive move, the financial sector is exploring scenarios where banks collaborate to issue KRW-pegged stablecoins, actively engaging with non-bank entities to streamline preparations for potential legalization.
Recent coverage by Maeil Business Newspaper indicates that leading credit card companies in South Korea are seeking trademark rights for what they aim to call the “CARD KRW” stablecoin. This move signals a robust interest in integrating stablecoins into the existing payment infrastructure.
The report highlights that credit card companies could significantly influence the KRW stablecoin sector, as they represent a familiar payment method for consumers—facilitating a seamless transition to digital payments using stablecoins.
