South Korea has postponed the adoption of a law regulating stablecoins

South Korean authorities have decided to postpone the adoption of an important bill aimed at regulating the stablecoin market. Discussion of key provisions has been postponed until next year. The main reason for the delay is that government and financial agencies cannot reach a consensus on which companies should be authorized to issue stablecoins.

Key Provisions of the FSC Bill

The Digital Asset Law, proposed by the Financial Services Commission of Korea (FSC), aims to minimize risks for investors and increase market transparency. The initiative includes a number of strict requirements:

Reserve Assets: Stablecoin issuers will be required to hold reserves fully covering the tokens issued in bank deposits or government bonds.

Bank Custody: 100% of outstanding reserve assets will need to be entrusted to licensed banks.

Issuer Liability: Companies providing digital asset services will be liable for damages from hacker attacks or system failures, even without proof of fault. This approach is similar to that applied to online retailers.

Disclosure: Requirements for disclosure, terms of service, and advertising standards comparable to those in the traditional financial sector are being introduced.

Possible Return of ICOs

An important potential innovation of the bill could be the legalization of initial coin offerings (ICOs) for local projects. If the law is passed, ICOs will be permitted subject to strict compliance with disclosure requirements and effective risk management. As a reminder, ICOs have been completely banned in the country since 2017.

Area of ​​disagreement between agencies

Despite the shared goal of regulating the market, various South Korean government agencies have serious disagreements over key points of the bill:

Right to issue stablecoins: The Bank of Korea insists that the right to issue stablecoins be granted exclusively to consortiums in which banks hold a controlling stake (at least 51%). The FSC, however, opposes such strict restrictions, fearing that they will slow innovation and exclude the participation of tech companies.

Advisory body: The Bank of Korea proposes creating a special committee to license issuers. The FSC considers this measure excessive, as it already functions as an authorized administrative body, comprising representatives from both the FSC and the Ministry of Economy and Finance.

In parallel with these discussions, the ruling Democratic Party is developing its own alternative bill, which aims to consolidate various legislative initiatives related to the regulation of digital assets.