South Korea’s much-anticipated Digital Asset Basic Act (DABA), a comprehensive framework designed to regulate crypto trading and issuance in one of Asia’s most vibrant digital asset markets, has encountered delays due to disagreements among regulators regarding stablecoin issuance.
The key contention revolves around who should hold the legal authority to issue KRW-pegged stablecoins, as reported by a Korea Tech Desk article. The Bank of Korea (BOK) has proposed that only banks with majority (51%) ownership should be authorized to issue stablecoins, arguing that financial institutions are already subject to rigorous solvency and anti-money laundering regulations, positioning them to ensure stability and protect the financial system.
In contrast, the Financial Services Commission (FSC), responsible for financial policy-making, is more accommodating. While recognizing the necessity for stability, it cautioned that a stringent “51% rule” might hinder competition and innovation, restricting fintech firms capable of developing scalable blockchain infrastructure from entering the market, according to the article.
The FSC referenced the European Union’s Markets in Crypto-Assets regulation, where most licensed stablecoin issuers are digital asset companies rather than banks. It also highlighted Japan’s fintech-oriented yen stablecoin initiatives as examples of regulated innovation.
This impasse underscores a larger global discussion regarding whether banks or fintech companies should govern fiat-backed stablecoins, a decision that could influence competition, innovation, and monetary regulation.
The ruling Democratic Party of Korea (DPK) also disputes the BOK’s 51% stipulation, as reported by a Korea Times article last week.
“The majority of the experts involved expressed concern regarding the BOK’s proposition, with many doubting whether such a model could foster innovation or create substantial network effects,” remarked DPK lawmaker Ahn Do-geol. “It’s also challenging to identify global legislative precedents requiring a 51% stake from institutions of a particular sector.”
He noted that the BOK’s concerns over stability could be addressed through regulatory and technological strategies, a viewpoint broadly shared among policy advisors.
Foreign-issued stablecoins present another critical sticking point. An earlier draft of the government proposal by the FSC indicated that foreign-issued stablecoins could be permitted in South Korea if they are licensed and have a branch or subsidiary within the country. This requirement would mean issuers like Circle, which provides USDC—the world’s second-largest stablecoin—would need to establish a local presence for their tokens to be legally utilized in the nation.
The regulatory stalemate is anticipated to postpone the bill’s approval until at least January, with full implementation now unlikely before 2026, according to AInvest. The digital assets act represents a significant change for a country that had banned crypto for nine years, a position that its financial regulator began to relax earlier this year.
