South Korea to Allow Private Issuance of Stablecoins, Boosting Economic Sovereignty

- New legislation aims to permit private companies to issue Korean won-pegged stablecoins. - The Digital Asset Basic Act could position South Korea as a key player in the global stablecoin market. On June 24, 2025, South Korea's Democratic Party, associated with President Lee Jae-myung, proposed the "Digital Asset Basic Act." This Act aims to permit private companies to issue stablecoins pegged to the Korean won, thereby fulfilling President Lee’s campaign promise. He had pledged to enhance financial sovereignty, reduce reliance on foreign digital currencies, and foster the digital asset industry. On June 10, 2025, KED Global, Fintech Hong Kong, and The Korea Herald reported that the Democratic Party introduced the proposed Digital Asset Basic Act. According to these reports, the bill will allow private companies to issue stablecoins, provided they meet a minimum equity capital of 500 million won (approximately $363,000 to $368,000) and maintain sufficient reserves to guarantee refunds. Furthermore, these companies must receive approval from the Financial Services Commission (FSC), and the proposal includes provisions to potentially increase this minimum capital requirement to 1 billion won. The bill, introduced by Democratic Party lawmaker Min Byoung-dug, aims to reduce trade costs, diversify foreign exchange risks, and promote transparency and fair competition within the crypto sector. It includes crucial mandates such as "bankruptcy remoteness," a provision requiring companies to keep stablecoin reserves separate to protect them if an issuer faces bankruptcy. In addition, the act proposes establishing a Presidential Committee on Digital Assets to oversee regulatory efforts and enforces strict measures against unfair trading practices like insider trading and market manipulation. This initiative offers South Korea an opportunity to establish a strong position in the global stablecoin market, with observers anticipating that tech giants like KakaoPay and Naver will benefit from these regulatory advancements. For instance, KakaoPay's shares reportedly surged in June. However, Bank of Korea (BOK) Governor Rhee Chang-yong has raised concerns, cautioning that stablecoins issued by non-bank entities might undermine monetary policy effectiveness and complicate foreign exchange management. Moreover, the shift towards stablecoins could adversely impact traditional card providers. The proposed legislation also addresses the broader crypto market by instituting a licensing system for token issuers and enforcing AML/KYC compliance for digital asset service providers. These measures follow a period of regulatory caution, particularly after the collapse of the TerraUSD stablecoin. In addition, President Lee's broader crypto agenda includes approving spot crypto ETFs, which are currently banned by authorities.