Draft bill outlines comprehensive framework for digital assets, including licensing, issuance and oversight

What to know:

• South Korea’s ruling Democratic Party has proposed a Digital Asset Basic Act that would create a comprehensive legal framework for issuing, trading, holding and supervising digital assets.
• The bill would require authorization and strict reserve, capital and operational standards for issuers of value-linked digital assets, including stablecoins tied to fiat currencies or real-world assets.
• The proposal, which seeks to position Korea as a leader in digital finance, comes as regulators tighten crypto rules, including new mandatory withdrawal delays on domestic exchanges to combat fraud.

South Korea’s ruling Democratic Party proposed a “Digital Asset Basic Act” Wednesday that would establish a legal framework for digital assets, including issuance, trading, custody and supervision.

“Digital assets are emerging as a core medium connecting the real economy and financial markets,” the proposal states. It defines value-linked digital assets, including those tied to fiat currencies or real-world assets, as a category requiring issuer authorization, refund reserves and redemption obligations.

The new proposal comes amid stalled Digital Asset Basic Act negotiations since early this year when regulators clashed over who should be allowed to issue won-pegged stablecoins. The Bank of Korea insisted banks with 51% ownership should be the only ones authorized to issue stablecoins, while the Financial Services Commission warned this could hinder innovation.

The bill also said it aims to “establish a foundation for Korea to lead the global digital financial order.” Under the proposal, entities seeking to issue such assets must obtain approval and meet requirements including capital thresholds, operational capacity and reserve plans.

The legislation would introduce licensing, registration and reporting requirements for digital asset businesses, including trading, brokerage, custody and advisory services.

It would also establish rules on disclosures, internal controls and market conduct, including prohibitions on unfair trading practices such as market manipulation and use of non-public information.

The proposal calls for the creation of a digital asset committee to review and coordinate policy, as well as national basic and implementation plans for the sector.

It also noted that South Korea’s current system remains focused on investor protection and lacks a comprehensive framework covering issuance, disclosure and market structure.

The proposal follows the announcement of new rules Wednesday by the country’s Financial Services Commission and Financial Supervisory Service ordering all domestic cryptocurrency exchanges to adopt a single, strict system for delaying withdrawals. The aim is to block a surge in voice phishing scams that rely on speed.