South Korea Advances Bill to Legalise Stablecoins in Finance

South Korea is taking a significant step toward legitimising stablecoins within its financial system with a new legislative proposal to create a comprehensive framework for their issuance and oversight.

Overview

Bloomberg reported that South Korea’s elected president, Lee Jae-myung of the ruling Democratic Party, proposed the Digital Asset Basic Act to improve transparency and encourage crypto sector competition. The bill, recently introduced by Representative Min Byung-deok of the Democratic Party, seeks to define and regulate the creation, circulation, and management of stablecoins—cryptocurrencies pegged to the value of fiat currencies such as the South Korean won or the US dollar. Under the proposal, stablecoin issuers must meet strict requirements, including maintaining full reserves equal to the value of the issued tokens. 

These reserves must be held in safe, liquid assets like cash or short-term government bonds. Furthermore, issuers would be subject to regulatory approval from the Financial Services Commission (FSC) and ongoing oversight to ensure compliance with consumer protection and anti-money laundering standards. The legislation comes amid growing concern over the potential systemic risks of unregulated stablecoins, which can disrupt traditional finance if not correctly managed. By laying out clear legal boundaries and expectations, the bill aims to promote innovation in the financial sector while safeguarding users and maintaining financial stability.

Safeguards and Supervision for Market Integrity

One of the bill’s key components is its emphasis on consumer protection and risk mitigation. The proposal mandates high transparency from stablecoin issuers, requiring regular disclosures about the reserves backing their tokens and independent audits to verify their claims. In the event of insolvency or failure, the bill would ensure that customers have legal recourse to reclaim their funds. Moreover, the bill sets out measures to prevent the misuse of stablecoins in illicit activities. 

It obliges issuers and related platforms to comply with know-your-customer (KYC) and anti-money laundering (AML) regulations, bringing them to international financial standards. Authorities believe these protections are essential for gaining public trust and institutional support. To further strengthen oversight, the FSC will be granted authority to suspend operations, fine issuers for non-compliance, or revoke licences if necessary. This level of supervision is expected to create a more resilient and transparent ecosystem for stablecoin use within South Korea.

BoostingInnovation and Global Competitiveness

The move to legalise and regulate stablecoins is part of South Korea’s broader strategy to become a leader in the digital finance space. By setting a clear legal precedent, the government hopes to attract domestic and international fintech companies to develop and launch new products there. Stablecoins are increasingly seen as critical infrastructure for next-generation payment systems, and regulators want to ensure South Korea is not left behind in the global shift toward digital assets.

Industry experts have generally welcomed the bill, a positive sign that the government is engaging constructively with crypto innovation rather than suppressing it. Some have also noted that a well-regulated stablecoin market could provide new opportunities for cross-border payments, remittances, and decentralised finance(DeFi)  applications. The bill is now under review in the National Assembly and is expected to undergo several rounds of discussion and amendment. If passed, South Korea will be one of the few major economies with a dedicated legal framework for stablecoins. It will join the European Union and Japan in pioneering responsible crypto regulation.

As the global digital economy evolves, South Korea’s progressive stance on stablecoin legalisation marks a pivotal moment in its financial modernisation journey. With clear rules and robust oversight, the country aims to unlock the benefits of blockchain-based finance while managing the associated risks.