Recently, South Korea’s Ministry of Science and ICT reported that the "Digital Asset Basic Act" has been delayed due to disagreements among regulators over stablecoin issuance. The Bank of Korea argues that only banks holding more than 51% equity should be allowed to issue stablecoins pegged to the Korean won.
In contrast, the Financial Services Commission worries that a strict "51% rule" would stifle competition and innovation.
01 Key Developments
The legislative process for South Korea’s Digital Asset Basic Act has hit a major roadblock. This highly anticipated law was intended to provide a comprehensive regulatory framework for one of Asia’s most active digital asset markets. However, disagreements among regulators over stablecoin issuance rights have brought progress to a standstill.
According to the Ministry of Science and ICT, the most significant dispute centers on who should have the legal authority to issue stablecoins pegged to the Korean won. This impasse is expected to delay the bill’s passage until at least January 2026, with full implementation unlikely before then.
This delay comes at a pivotal moment for South Korea’s digital asset market. After a nine-year ban on cryptocurrency trading, financial regulators began to soften their stance earlier this year. The Digital Asset Basic Act represents a major shift in the country’s approach to cryptocurrency regulation.
02 Regulatory Divide
The Bank of Korea maintains that only banks with a majority stake (51%) should be permitted to issue stablecoins. The central bank argues that financial institutions are already subject to strict solvency and anti-money laundering requirements, making them best positioned to ensure stability and protect the financial system.
In a report, the Bank of Korea stated: "Stablecoins could be the key to unlocking new possibilities for Korea’s economy, but they also have the potential to introduce new sources of instability."
The Financial Services Commission, however, has taken a more flexible stance. While acknowledging the need for stability, the commission warns that a rigid "51% rule" could suppress competition and innovation, shutting out fintech companies with the technical expertise to build scalable blockchain infrastructure.
The commission cited the EU’s Markets in Crypto-Assets (MiCA) regulation, where most licensed stablecoin issuers are digital asset companies rather than banks. It also pointed to Japan’s fintech-driven yen stablecoin projects as examples of regulated innovation.
03 Political Dynamics
This regulatory debate has spilled over into the political arena. South Korea’s ruling Democratic Party also opposes the Bank of Korea’s 51% rule.
Democratic Party lawmaker Ahn Do-ji stated: "Most experts involved have expressed concerns about the Bank of Korea’s proposal, with many questioning whether such a framework can foster innovation or generate strong network effects."
Ahn added, "It’s hard to find global legislative precedents requiring a specific industry entity to hold a 51% stake." He believes the central bank’s stability concerns can be addressed through regulatory and technological means—a view widely shared among policy advisors.
04 Key Provisions of the Bill
Despite the controversy over stablecoin issuance, the proposed Digital Asset Basic Act includes a series of measures aimed at strengthening investor protection.
For stablecoin issuers, the bill would require them to hold reserves exclusively in low-risk instruments such as bank deposits or government bonds. Additionally, issuers would need to place all outstanding reserves—100%—under the management of an independent custodian, typically a bank.
This bankruptcy-remote structure is designed to shield holders from potential losses if an issuer faces financial collapse, addressing vulnerabilities exposed by past global incidents.
Beyond stablecoins, the bill extends traditional financial standards to digital asset platforms. Service providers would face requirements for transparent disclosures, fair terms of service, and regulated advertising practices.
In the event of security breaches or operational failures, operators could be held strictly liable for user losses—even without proven negligence—mirroring protections found in the e-commerce sector.
A notable shift in the proposal is the reopening of domestic token sales. Since the 2017 ban on initial coin offerings (ICOs), local projects have often sought overseas listings to raise capital. The new framework could allow Korean projects to conduct regulated ICOs, provided they comply with stringent transparency rules and demonstrate strong risk controls.
05 Foreign Stablecoin Controversy
Foreign-issued stablecoins are another major point of contention. Under early government drafts by the Financial Services Commission, foreign stablecoins would be permitted in Korea if licensed and if the issuer establishes a local branch or subsidiary.
This means issuers like Circle, which operates the world’s second-largest stablecoin USDC, would need to set up a local entity for their token to be legally used in Korea.
The Bank of Korea has also warned that stablecoins could become channels for circumventing foreign exchange and capital controls, potentially undermining the effectiveness of monetary policy. Issuing won-denominated stablecoins could also increase short-term interest rate volatility, as issuers’ purchases of government bonds and other reserve assets might exert downward pressure on market rates.
06 Market Impact and Opportunities
The regulatory deadlock has created uncertainty in the market but also unique opportunities. Take XRP as an example—its price stood at $1.8687 as of December 31, 2025.
This price performance reflects broader market sentiment—searching for direction amid regulatory uncertainty.
Renowned crypto analyst Dark Defender noted that XRP is currently testing the $1.87 low but has already established its own price trajectory, aiming for a target of $3.66.
Dark Defender added, "The fourth wave correction for XRP is complete… If market makers want to shake things up, so be it. I’m not here to panic—I’m here to accumulate."
According to CoinCodex data, by December 31, 2025, XRP’s price could remain around $1.88, with the token potentially reaching a new stable price of $2.14 by March 2026.
07 Future Outlook and Global Comparisons
South Korea’s regulatory impasse mirrors a broader global debate over whether banks or fintech companies should control fiat-backed stablecoins. The decision could shape competition, innovation, and monetary oversight.
Compared to the EU’s Markets in Crypto-Assets (MiCA) regulation, South Korea’s stance is noticeably more cautious. Under the EU framework, most licensed stablecoin issuers are digital asset companies rather than banks.
South Korea faces a dual challenge: ensuring financial stability and investor protection while avoiding stifling emerging technologies that could drive economic growth and innovation.
A Financial Services Commission official revealed that authorities are still in talks with other agencies and evaluating all possible options. Nevertheless, with some issues still unresolved, the bill’s submission has been postponed until next year.
Meanwhile, reports indicate that the ruling party’s digital asset task force is using existing bills proposed by lawmakers to draft an alternative proposal. This suggests that despite delays, the legislative process is ongoing, with all parties seeking solutions to the current deadlock.
Looking Ahead
The future of South Korea’s crypto market remains uncertain. The divisions among regulators are not merely technical—they reflect deeper philosophical differences about the nature of financial innovation.
On global exchanges like Gate, Korea’s regulatory developments are being closely watched. The outcome of the debate over stablecoin issuance rights will not only determine whether the Digital Asset Basic Act can be implemented as planned in 2026, but also influence the competitive landscape and direction of innovation in Asia and the global digital asset market.
As the global financial system accelerates its shift toward blockchain technology, South Korean regulators face a critical challenge: how to maintain financial stability without being left behind in the wave of financial innovation.
