South Korean lawmaker Min Byeong-deok has proposed the Digital Asset Basic Act to strengthen cryptocurrency regulation.

The bill expands on the Virtual Asset Investor Protection Act, aiming to create a broader framework beyond just investor safety.

It introduces a licensing system for stablecoin issuers, requiring at least 500 million won in capital to support a local, won-based stablecoin market.

The proposal draws from global standards and includes forming a presidential-level Digital Asset Committee and penalties for market abuse.

This move follows a global trend of stricter stablecoin rules, as seen in the US, EU, Japan, and Hong Kong.

🔗 Source: The Block

🧠 Food for thought

1️⃣ South Korea’s crypto regulation reflects a shift from crisis response to strategic framework

South Korea has experienced a dramatic evolution in its approach to cryptocurrency regulation since 2017, when it accounted for nearly 30% of global crypto trading despite representing less than 1% of the world’s population 1.

The country’s initial regulatory response in 2017-2018 was primarily reactive, banning anonymous trading accounts after prices surged and crashed, causing Bitcoin to drop 11% in a single day 2.

This latest Digital Asset Basic Act represents a shift to a proactive, structured approach that builds on the foundation of the Virtual Asset User Protection Act implemented just months ago in July 2024 3.

The establishment of a Digital Asset Committee directly overseen by the president signals elevated importance, moving crypto regulation from a peripheral concern to a central economic strategy 3.

This evolution parallels global regulatory trends, with South Korea now joining jurisdictions like the EU, Hong Kong, and Singapore that have established comprehensive frameworks rather than piecemeal regulations 4.

2️⃣ The proposed won-based stablecoin reflects economic sovereignty concerns

President Lee Jae-myung’s support for a Korean won-based stablecoin directly addresses capital outflow concerns, with the legislation explicitly aiming to “prevent the outflow of domestic capital via stablecoins based on other currencies” 3.

This approach aligns with a growing global trend of countries developing domestic currency stablecoins, as seen in Singapore’s framework for single-currency stablecoins and Hong Kong’s regulatory sandbox for stablecoin testing 5.