The South Korean government, under President Lee Jae-myung, is advancing a landmark cryptocurrency bill aimed at legalizing domestically issued stablecoins. This legislative move signals a strategic shift toward embracing digital assets and fostering innovation in one of Asia’s most active crypto markets.
With over 18 million participants—more than a third of the population—South Korea has long been a hub for blockchain innovation and retail crypto trading. Now, the administration is formalizing its support through the Digital Asset Basic Act, recently introduced by the ruling Democratic Party.
Advancing the Digital Asset Basic Act
The proposed Digital Asset Basic Act seeks to enhance transparency, strengthen investor protection, and promote fair competition within the country's rapidly growing digital asset sector. A central component of the bill is the legalization of locally issued stablecoins, provided they meet strict regulatory requirements.
Under the draft legislation, companies wishing to issue stablecoins must:
- Maintain a minimum capital of 500 million KRW (approximately $368,000)
- Hold sufficient reserves to guarantee full redemption
- Obtain approval from the Financial Services Commission (FSC), South Korea’s primary financial regulator
These safeguards are designed to prevent systemic risks while encouraging responsible innovation. By establishing clear rules for issuance and oversight, the government aims to build trust in digital finance and reduce reliance on foreign-issued stablecoins like USDT or USDC.
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Stablecoin Surge and Market Demand
Data from the Bank of Korea highlights the rising demand for stablecoins. In the first quarter alone, transactions involving major dollar-pegged stablecoins reached 57 trillion KRW (about $42 billion) across five leading domestic exchanges.
This surge reflects growing public interest in blockchain-based payments, decentralized finance (DeFi), and cross-border transactions. Legalizing a won-backed stablecoin could further accelerate adoption by offering a regulated, low-volatility digital alternative tied directly to the national currency.
President Lee has emphasized that creating a domestic stablecoin ecosystem will help retain financial value within the country’s economy. “We need to establish a stablecoin market backed by the Korean won to prevent national wealth from flowing overseas,” he stated during a policy forum in May.
Fulfilling Campaign Promises on Crypto Innovation
Lee Jae-myung’s push for crypto reform stems from key campaign commitments made before his decisive victory in the early presidential election on June 3. Beyond stablecoins, his administration supports broader integration of digital assets into mainstream finance.
Key initiatives include:
- Exploring Bitcoin (BTC) investments by South Korea’s National Pension Fund
- Approving Bitcoin exchange-traded funds (ETFs) for local markets
- Supporting blockchain startups and Web3 infrastructure development
These proposals align with a vision of South Korea as a leader in financial technology and digital sovereignty. If implemented, they could position the country alongside pioneers like the United States and Hong Kong in offering institutional-grade crypto access.
Central Bank Resistance and Regulatory Challenges
Despite political momentum, the plan faces resistance from the Bank of Korea (BOK). Governor Rhee Chang-yong has voiced concerns that privately issued stablecoins could undermine monetary policy effectiveness and threaten financial stability.
The central bank argues that any won-denominated stablecoin should be issued or tightly supervised by the BOK itself, similar to a central bank digital currency (CBDC). It fears unregulated tokens could displace traditional banking functions and complicate inflation control.
Historical context also plays a role. Many Korean investors suffered significant losses from the collapse of Terraform Labs’ UST algorithmic stablecoin in May 2022. Co-founded by South Korean entrepreneur Do Kwon, the crash eroded public trust and heightened sensitivity around unbacked digital assets.
As such, regulators remain cautious about enabling private entities to issue currency-like instruments without robust oversight.
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Impact on Korean Crypto-Linked Stocks
The government’s pro-crypto stance has already triggered market reactions. Shares of blockchain-integrated financial firms have surged, reflecting investor optimism.
For example, KakaoPay, a leading mobile payment and digital wallet provider, saw its stock climb up to 45% over five days following news of the proposed legislation, according to Google Finance data.
Other firms in the digital finance space, including Naver Financial and Toss, may also benefit if the stablecoin framework expands use cases for tokenized payments and smart contracts.
However, not all analysts are convinced. Morgan Stanley analysts Stanley Yang and Jihyun Cho caution that “the rally in Kakao-related stocks appears fundamentally unsustainable, given uncertainty around whether Lee’s stablecoin policy will deliver tangible economic benefits.”
Their concern underscores the need for clear implementation timelines and measurable regulatory frameworks to sustain long-term investor confidence.
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Frequently Asked Questions (FAQ)
Q: What is the Digital Asset Basic Act in South Korea?
A: It is a proposed law by South Korea’s ruling party to regulate digital assets, including legalizing locally issued stablecoins. The act sets capital requirements, reserve rules, and mandates FSC approval for issuers.
Q: Can private companies issue stablecoins under the new bill?
A: Yes, but only if they meet minimum capital thresholds (500 million KRW), maintain full reserve backing, and receive authorization from the Financial Services Commission.
Q: Will the stablecoin be pegged to the Korean won?
A: While not explicitly confirmed in the draft, President Lee has advocated for a won-backed stablecoin to keep financial activity within the domestic economy.
Q: Why is the Bank of Korea opposed to private stablecoins?
A: The central bank worries that non-bank issued stablecoins could weaken monetary policy control and pose systemic risks, especially after past incidents like the Terra crash.
Q: How might this affect crypto investors in South Korea?
A: Legal clarity could boost investor confidence, expand DeFi access, and increase liquidity in local exchanges. It may also open doors for BTC ETFs and institutional crypto adoption.
Q: Are there any risks associated with this legislation?
A: Yes—regulatory delays, central bank pushback, and potential misuse of tokens could slow progress. Strong compliance frameworks will be essential to avoid repeating past failures.
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As South Korea stands at the crossroads of innovation and regulation, its approach to stablecoins could serve as a model for other G20 nations navigating the future of money. With political will, technical safeguards, and market readiness aligning in 2025, the country may soon launch a new era of inclusive, transparent, and sovereign-backed digital finance.