South Korea’s Digital Asset Framework Bill Stalls Over Stablecoin, Exchange Rules

The government and the ruling party are struggling to draft a second-phase virtual asset bill, with delays in submitting a government proposal. The Democratic Party of Korea has moved to prepare its own version, but has yet to produce a draft as disagreements persist over licensing conditions for won-denominated stablecoin issuers and limits on ownership stakes in virtual asset exchanges.
  The Democratic Party of Korea’s digital asset task force held its second closed-door meeting Tuesday at the National Assembly Members’ Office Building in Seoul to work on the second-phase legislation. Members said they reached agreement on the law’s name and how to classify business categories, but remained divided on key issues.

The bill’s stated purpose would be to promote the digital asset industry and protect investors. The working title was tentatively set as the “Digital Asset Framework Act.” The act would define eight categories of digital asset businesses. Of those, two to three categories seen as high-risk or requiring strong public trust would need authorization from financial regulators, while the rest could operate through registration.

The draft would also create an interagency consultative body tentatively called the “Virtual Asset Council.” The Financial Services Commission chair would lead it, with members including a deputy governor of the Bank of Korea, a vice minister from the Ministry of Economy and Finance, and a vice minister from the Ministry of Science and ICT.

The council would be expected to handle matters such as licensing won stablecoin issuance and responding to infrastructure problems. The Bank of Korea had sought a committee that would require unanimous votes to approve agenda items, but that approach was not accepted.

After the meeting, task force chair Lee Jeong-moon told reporters, “Since the Financial Services Commission consults with the Bank of Korea in the policy decision process, most lawmakers agreed it would be better to proceed with a consensus-based approach rather than a unanimity rule.”
  No agreement was reached Tuesday on requirements for issuing won-denominated stablecoins, a central issue. The Bank of Korea argues issuance should be allowed only for consortia in which banks hold a majority stake, saying banks should lead the market to support financial stability. The Financial Services Commission and the ruling party counter that such a rule could block technology companies from entering the market, leaving the sides sharply split.

However, they agreed to set the minimum paid-in capital for won stablecoin issuers at 5 billion won. The level appears to be based on regulatory standards for electronic money businesses. The task force said it will prepare compromise proposals on unresolved items and continue talks.

Task force member Rep. Lee Kang-il said, “There are sharp differences between the National Assembly and the government over bank-majority consortia, and a mediation proposal has been delivered to both sides.” He added, “We will make decisions in a direction that helps the overall national interest and encourages public participation.”

The task force is also expected to keep discussing whether to limit the ownership stake of major shareholders in virtual asset exchanges. The issue had appeared likely to be excluded to speed legislation, but the task force has shifted to a more cautious stance.

Members broadly agree with the intent of limiting major shareholders’ stakes, but differ on whether to include it in the initial bill or pass the law first and revise it later. The task force said it will consult the party’s policy committee before deciding.

The task force plans to spend about one to two weeks coordinating around mediation proposals, aiming to finalize and introduce the bill before the Lunar New Year holiday. Even if the ruling party reaches agreement with the government, the bill would still need discussions with the opposition People Power Party at the National Assembly’s Political Affairs Committee, suggesting the process could remain difficult for some time.