South Korea has decided to postpone its Digital Asset Basic Law until 2026. This postponement comes as regulators in the country remain at odds over who will oversee stablecoin reserves, according to legislative sources. This decision prolongs the uncertainty faced by the nation's burgeoning cryptocurrency market.
The Core of the Stalemate
The draft of the new law is intended to be the cornerstone of South Korea’s cryptocurrency regulatory framework, aiming to boost investor protection by implementing stricter legal standards on digital asset operators. However, debates between the Financial Services Commission and the Bank of Korea have significantly hindered progress. These regulatory bodies disagree primarily over enforcement responsibilities concerning stablecoin reserves and control measures.
Key Provisions in the Draft
A notable aspect of the draft includes the introduction of no-fault liability, which would make digital asset operators liable for user losses even in the absence of proven negligence. Additionally, the law requires stablecoin issuers to maintain reserves that exceed 100% of the circulating supply. These reserves must be deposited at banks or approved financial institutions and must be separated from the issuer’s balance sheet to minimize risks.
The Disagreement on Stablecoin Oversight
Stablecoin oversight has surfaced as the principal point of contention. While both sides agree on the necessity of heightened supervision, they have yet to reach a consensus on how reserve rule enforcement should be handled or who should have licensing authority. As disagreements on enforcing powers and the treatment of reserve assets persist, the decision was made to postpone rather than proceed with unresolved issues.
Implications for the Crypto Market
The delay creates a cloud of uncertainty for cryptocurrency firms operating in South Korea, including exchanges, payment providers, and stablecoin issuers. Without a solid regulatory framework, product launches and investment strategies face possible delays, experts have noted. This has left the crypto industry in a state of anticipation, as operational planning remains constrained.
Steps Towards a Revised Bill
The ruling Democratic Party is currently in the process of consolidating several lawmaker proposals into a single, revised digital asset bill. President Lee Jae Myung has advocated for the introduction of a Korean won-backed stablecoin as a method of countering the international dominance of US dollar-linked stablecoins, highlighting it as a national priority.
The Road Ahead
The delayed Digital Asset Basic Law is part of a broader regulatory strategy that started with a first phase addressing unfair trading practices in the digital asset sector. This second phase, once implemented, is expected to bring comprehensive changes to how digital assets are managed within South Korea.
Observers are keenly watching for developments, hoping for a resolution that will offer clarity and support the growth of South Korea's digital economy.
