South Korea is approaching a significant regulatory milestone for digital assets, as lawmakers and financial authorities are reportedly developing a plan to restrict the issuance of Korean-won-pegged stablecoins to consortia where commercial banks hold a majority stake.
This proposed framework, discussed in a closed meeting on December 1 involving members of the ruling Democratic Party of Korea, officials from the Financial Services Commission (FSC), and banking industry representatives, is part of the broader effort to enact a comprehensive Digital Asset Basic Act. This legislation aims to regulate stablecoins and other digital assets, including their issuance.
Banks to Lead Fintechs in Proposed Consortium Structure
Under the envisioned new framework, entities wishing to issue stablecoins will operate as consortia, with banks required to hold at least 51% of the shares.
Kang Junhyun, the Democratic Party’s secretary of the National Assembly’s Political Affairs Committee, confirmed the discussions following the meeting. He stated that the contentious issue of stablecoin issuance has been resolved through a "consortium format" by aligning the positions of the Bank of Korea, the Financial Services Commission, and the banking industry.
Regulatory and Political Deadlines Loom for South Korea
Lawmakers have set a deadline for the government, demanding the submission of a draft bill outlining the core framework by December 10.
Kang indicated that if the government's proposal is not submitted by this deadline, lawmakers will proceed with legislation initiated through the Political Affairs Committee.
According to Kang, lawmakers intend to swiftly share and propose the finalized bill, followed by a public debate process involving the Digital Asset Task Force within the Democratic Party. He anticipates that while discussions might occur within the current year, the actual passage of the bill is likely to take place in January of the following year, acknowledging that the legislative process, including potential opposition from the People Power Party, may require considerable time.
Consortium Plan Faces Diverging Views and Remains Unfinalized
In the preceding month, the Bank of Korea (BOK) expressed concerns that non-bank stablecoin issuers could pose risks to monetary policy, deposit protection frameworks, and overall financial stability. The central bank argued that such entities would function similarly to narrow banks, issuing currency and providing payment services, suggesting the consortium arrangement is a response to these concerns.
However, segments of the stablecoin ecosystem, including some fintech advocates and industry stakeholders, contend that restricting stablecoin issuance solely to banks could stifle innovation and competition. They argue that a bank-dominated issuance model might reduce stablecoins to mere digital bank deposits, potentially limiting their utility in areas such as cross-border payments and decentralized finance applications.
Furthermore, even after the December 1 meeting, the FSC issued a statement clarifying that "no decision had been finalized" regarding the consortium plan. This indicates that the proposed regulatory framework has not yet achieved consensus among all involved parties. Attention is now focused on the government's response to the ultimatum issued by the lawmakers.