South Korea lawmakers push urgent stablecoin legislation as regulatory disputes stall

South Korean lawmakers are urging the government to prioritize approval of a regulatory framework for stablecoins, as disputes between the Bank of Korea and the Financial Services Commission have delayed progress. Rep. Kim Sang-hoon, chairman of the Special Committee on Digital Assets, publicly demanded that the National Assembly prioritize stablecoin legislation, warning that the market is already moving ahead while politicians debate governance structures. The emergence of a Korean won stablecoin reportedly issued and circulated overseas has renewed lawmakers’ urgency to advance the Digital Asset Framework Act.

Central Dispute: Stablecoin Issuance Authority

The second phase of the Digital Asset Framework Act remains stuck in committee due to disagreement between regulators on who should issue a Korean won stablecoin. The Bank of Korea argues that only consortia where banks hold a majority stake (50% plus one share) should be allowed to issue these assets to ensure financial stability. However, the Financial Services Commission reportedly disagrees with legally enforcing a specific percentage, arguing that it should leave room for technology companies and fintech startups.

Rep. Kim criticized the delay in approving the framework, stating that “governance issues such as limiting the stakes of major shareholders suddenly take up the center of the discussion,” pushing essential market stability discussions to the back burner. He warned that “the reality that stablecoins are being issued and distributed overseas first is raising serious concerns about our currency sovereignty,” according to local media reports.

Major meetings between the ruling party and the Financial Services Commission have been postponed due to external factors, including the Iran-US situation and the June 3 local elections.

Exchange Shareholding Limits Controversy

The second major regulatory issue involves limiting ownership stakes in crypto exchanges that would list stablecoin assets. The government is reportedly considering a rule similar to the Capital Markets Act, which would limit major shareholders in crypto exchanges like Upbit operator Dunamu or Bithumb to between 15% and 20%.

The industry has responded negatively to the proposed limits. Lawyer Han Seo-hee, an advisor to the Democratic Party’s Digital Asset Task Force, argued at a spring conference of the Korean Commercial Law Association in Seoul that such limits violate property rights and equal protection principles. She pointed out that no other major jurisdiction, including the EU, the US, or Singapore, imposes such rigid ownership caps on exchanges.

Democratic Party’s Alternative: Real World Assets Regulation

While the government debates equity caps, the opposition Democratic Party is moving forward with provisions to regulate Real World Assets (RWA). According to a draft integration plan, issuers of RWA tokens must store those assets in a managed trust under the Capital Markets Act.

The Democratic Party’s Digital Asset Task Force, led by Lee Jung-moon, has urged the National Assembly to start discussing the bills immediately. They argue that since eight different digital asset bills have already been submitted, waiting for the “perfect” government proposal is a waste of time.

Expert Assessment on Core Issues

Professor Lee Jong-seop of Seoul National University stated that “the essence of the stablecoin crisis is not a problem of governance structure” but how to secure market trust through proper reserve holdings.

FAQ

Q: Why is South Korea’s stablecoin legislation delayed?

A: The Digital Asset Framework Act is stuck in committee due to disagreement between the Bank of Korea and the Financial Services Commission on who should issue a Korean won stablecoin. The Bank of Korea wants banks to hold a majority stake (50% plus one), while the Financial Services Commission prefers leaving room for technology companies and fintech startups. Additionally, major meetings between the ruling party and regulators have been postponed due to external factors.

Q: What is the dispute over exchange shareholding limits?

A: The government is considering limiting major shareholders in crypto exchanges to 15-20%, similar to the Capital Markets Act. The industry opposes this as unconstitutional and destructive to shareholder value. Legal experts argue that no other major jurisdiction, including the EU, the US, or Singapore, imposes such rigid ownership caps.

Q: What is the Democratic Party proposing as an alternative?

A: The Democratic Party’s Digital Asset Task Force is proposing regulations for Real World Assets (RWA), requiring issuers of RWA tokens to store assets in a managed trust under the Capital Markets Act. They have urged the National Assembly to begin discussing the eight digital asset bills already submitted rather than waiting for a government proposal.