South Korea's cryptocurrency law remains at a standstill due to regulatory conflicts — intense debate over the authority to issue stablecoins

South Korea’s move to establish the Digital Asset Basic Act (DABA), a comprehensive cryptocurrency regulation framework after nine years, has been stalled due to conflicting views among regulatory authorities over the issuance rights of Won-linked stablecoins. This dispute highlights concerns about regulatory feedback suppression by authorities and prolongs uncertainty in one of Asia’s largest cryptocurrency markets.

Banks vs Fintech — The Conflict Over Issuance Rights

The Bank of Korea (BOK) advocates limiting the issuance of Won-linked stablecoins to banks holding over 51% of shares. The BOK argues that banks, already subject to strict capital regulations and anti-money laundering measures, are the most suitable entities to issue stablecoins, ensuring financial system stability.

Conversely, the Financial Services Commission (FSC) warns that the 51% rule could hinder competition and slow innovation. There are particular concerns that regulatory feedback suppression might significantly restrict the entry of fintech companies with technical expertise.

Democratic Party (DPK) lawmaker Ahn Do-geol also expressed opposition, stating, “Most experts involved have raised concerns about the BOK’s proposal, and there is no global legislative precedent for imposing a 51% ownership requirement on a specific sector.”

Examining International Regulatory Models

The FSC presented the European Union (EU) cryptocurrency regulations as a comparative example. In the EU market, most authorized stablecoin issuers are not banks but digital asset companies. Additionally, Japan’s fintech-led yen stablecoin project was cited as a positive example of regulatory feedback facilitation.

These international success stories suggest that diversification of issuers beyond banks can foster market innovation and healthy competition.

The Issue of Foreign-Issued Stablecoins

The preliminary government draft proposes that foreign-issued stablecoins (e.g., USDC) be permitted only if they obtain a license in Korea and establish local branches or subsidiaries. This measure would require international stablecoin issuers to implement additional local compliance measures when entering the Korean market.

Delays in Legislation Approval — Implementation by 2026 at Risk

According to AInvest, the current regulatory deadlock is expected to delay the bill’s approval until at least January. Full enforcement before 2026 appears increasingly unlikely.

For Korea, DABA represents a historic turning point, shifting away from the de facto ban on cryptocurrencies that has persisted for the past nine years. The delay, amid gradual regulatory easing by financial authorities since early this year, further amplifies market participants’ uncertainty.

Conclusion — Balancing Fintech Prosperity and Feedback Suppression

Deciding on stablecoin issuance rights is not merely a domestic policy issue but a fundamental choice shaping competition principles, innovation promotion, and the future of currency oversight. Approaches that avoid regulatory feedback suppression while ensuring financial system stability are critically needed.