South Korea Pushes Forward with New Legislation to Legalize Stablecoins

     The information provided contains a significant factual error regarding the South Korean president. Lee Jae-myung is not the current President of South Korea. The current President is Yoon Suk-yeol, who took office in May 2022. There was no "early election" on June 3rd with Lee Jae-myung as the victor. The last presidential election was in March 2022.

     Therefore, the premise that "President Lee Jae-myung immediately after his landslide victory in the early election on June 3rd, rapidly pushed forward the digital asset agenda, notably promising to legalize KRW-pegged stablecoins..." is incorrect.

While the general idea of South Korea looking into digital asset regulation and potentially stablecoins pegged to the Korean Won is accurate given ongoing global trends in cryptocurrency regulation, this specific statement attributes the action to the wrong person and a non-existent election.

     On June 10, Representative Min Byeong-deok, a member of the ruling Democratic Party and former head of digital affairs during Mr. Lee's election campaign, announced the bill 'Digital Asset Basic Act,' signaling a major step forward in the legal framework for crypto in South Korea.

1. 1. South Korea's New Digital Asset Bill: Paving the Way for Regulated Stablecoins

     This new bill is designed to establish a clear licensing framework for stablecoin issuers. Key requirements include a minimum paid-in capital of 500 million won (approximately $368,000 USD), a reserve mechanism to guarantee user refunds, and pre-approval from the Financial Services Commission (FSC) before issuance.

1. 2. Building on Existing Regulatory Frameworks

2.      This initiative represents the next crucial step following the Virtual Asset User Protection Act, which took effect in July 2024. While that act primarily focused on safeguarding investors from trading risks, the proposed Digital Asset Basic Act aims to cultivate a comprehensive legal ecosystem for digital assets, encompassing everything from issuance and circulation to trading and fraud penalties.

1. 3. Introducing the Digital Asset Committee

2.      A significant feature of the bill is the proposal to establish a Digital Asset Committee, directly overseen by the President. This committee would be responsible for policy formulation, inter-agency coordination, and fostering the development of blockchain and cryptocurrency initiatives.

1. 4. Broader Regulatory Scope Beyond Stablecoins

2.      Beyond stablecoins, the bill also provides clear legal definitions for digital assets, categorizes Virtual Asset Service Providers (VASPs), and introduces regulations for combating market manipulation and insider trading.

1. 5. Central Bank Opposition and Market Dynamics

2.      Despite government backing, the push for stablecoin regulation faces strong opposition from the Bank of Korea (BoK). Governor Rhee Chang-yong has cautioned that non-bank issued stablecoins could undermine the effectiveness of monetary policy. He asserts that the BoK, not the FSC or private entities, should lead the oversight of won-pegged stablecoins.
3.     Furthermore, analysts suggest that South Korea has yet to fully regain confidence following the 2022 collapse of the Terra-LUNA ecosystem and the algorithmic stablecoin UST, founded by Do Kwon. This event wiped out tens of billions of dollars from the market and severely impacted both domestic and international investors.

1. 6. Resilient Stablecoin Market Growth in Korea

2.      Nevertheless, the stablecoin market in South Korea has demonstrated remarkable growth. According to data from the Bank of Korea, the trading volume of major stablecoins like USDT and USDC in Q1 2025 reached 57 trillion won (approximately $42 billion USD) across just five major domestic exchanges.
3.     South Korea stands as one of Asia's most vibrant crypto markets, with over 18 million people (roughly 36% of its population) reportedly involved in the cryptocurrency market. This new bill is anticipated to open doors for Korean companies to issue domestic won-pegged stablecoins, thereby enhancing capital flow control and enabling fair competition with foreign stablecoins.

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