South Korea Moves Forward with Stablecoin Regulation
According to reports, South Korea has taken a step towards creating a legal framework for stablecoins that are pegged to the won and the US dollar via a proposed bill. Under the elected President Lee Jae-myung, the Digital Asset Basic Act seeks to regulate the rapidly growing digital asset market of the nation and bring about trust and order.
Key Provisions of the Proposed Law
According to the new bill, businesses in the area will be permitted to issue stablecoins as long as they release any stablecoins only if the conditions are met. Issuers must also get the nod from the Financial Services Commission (FSC), support 1:1 fiat collateral in Korean banks, and submit daily proof-of-reserve reports. The steps above are aimed to ensure that all issued stablecoins are backed and redeemable.
Consumer Protection and Risk Management
In order to protect the consumers, the bill lays down the rules of monthly stress tests, insurance funds for unexpected events, and 2 business days mandatory redemption. Because of risks from market volatility, retail investors will also face limits on their transactions.
South Korea’s Crypto Activity Surge
This recent increase of crypto activity in the country spurs the latest push for regulation. The Bank of Korea said that among the major exchanges, stablecoin trading amounted to 57 trillion won in Q1 2025. After the crash of Terra-LUNA in 2022, which impacted investors and regulations, South Korea experienced it earlier.
Crypto Exchanges Prepare for the New Landscape
Crypto exchanges are already preparing for the shift. Upbit partners with Shinhan Bank in a KRW stablecoin. And Bithumb is consulting with Circle and Gemini on the release of a licensed USD stablecoin for Korean users. Global crypto players like Tether, Circle and Binance are now turning their focus towards Korea. Reportedly, Circle is setting up a subsidiary in Seoul, while Binance is extending technical help to local banks to penetrate the market.
Central Bank’s Concerns
Despite gaining traction, the Bank of Korea expressed worries about the effectiveness of monetary policy getting impaired by stablecoins that banks do not issue. The central bank claims it must lead on regulating any stablecoin that is backed by the national currency.
President Lee’s Broader Crypto Vision
The wider crypto agenda of President Lee includes Bitcoin ETF approval and investment into cryptos in the national pension fund. According to his administration, restricting the stablecoin environment will prevent capital outflows to foreign countries and strengthen South Korea’s position in the global crypto economy.
A Regulatory Model for Asia?
As discussions over the bill continue, it is clear that South Korea isn’t just regulating crypto; it is looking to take charge. If the legislation passes, it could create a strong precedent for regulating digital assets across Asia and beyond.
