South Korea's Ruling Party Proposes Bill to Legalize Stablecoins

The proposed legislation, known as the Digital Asset Basic Act, aims to establish a comprehensive regulatory framework for cryptocurrencies and stablecoins. Under the bill, companies with a minimum equity capital of approximately $368,000 (500 million won) would be permitted to issue stablecoins, provided they secure approval from the Financial Services Commission (FSC) and maintain adequate reserves to guarantee refunds.

President Lee Jae-myung, who assumed office following a snap election on June 3, has been a vocal advocate for integrating digital assets into the country's financial system. During his campaign, he pledged to legalize stablecoins and promote the development of a won-backed digital currency to prevent capital outflows and enhance monetary sovereignty.

In a May discussion, President Lee emphasized the importance of developing a domestic won-backed stablecoin market as a safeguard against capital flight and to strengthen monetary sovereignty.

The move comes amid a surge in stablecoin trading within South Korea. According to data from the Bank of Korea, transactions involving major U.S. dollar-pegged stablecoins like Tether (USDT) and USD Coin (USDC) reached $42 billion (57 trillion won) on five main domestic exchanges in the first quarter of 2025.

While the proposed legislation has been welcomed by many in the crypto industry, it has also drawn criticism from the Bank of Korea. The central bank has expressed concerns that allowing non-bank entities to issue stablecoins could undermine the effectiveness of monetary policy. Bank of Korea Governor Rhee Chang-yong has argued that the central bank should play a leading role in regulating any local currency stablecoins.

The introduction of the Digital Asset Basic Act is part of a broader effort by the South Korean government to modernize its financial regulations and foster innovation in the digital economy. In addition to stablecoin legislation, the ruling party has pledged to approve spot crypto exchange-traded funds (ETFs) and dismantle the "one exchange, one bank" rule, which currently restricts partnerships between banks and crypto exchanges.

As the bill moves through the legislative process, it is expected to undergo rigorous debate and potential amendments. However, with strong backing from the ruling party and President Lee's administration, the Digital Asset Basic Act represents a significant step toward integrating digital assets into South Korea's financial infrastructure.

If enacted, the legislation could position South Korea as a leader in the global digital asset market, providing a regulatory model for other countries seeking to balance innovation with financial stability.