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South Korea’s Crypto Regulation Delayed as Stablecoin Rules Face Deadlock

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South Korea’s subsequent main step towards complete crypto regulation has been pushed into 2026, as regulators stay divided over how tightly stablecoin issuance must be managed.

Key Takeaways:

  • South Korea’s complete crypto regulation has been delayed to 2026 as a result of a dispute over who must be allowed to subject stablecoins.
  • Regulators are proposing strict stablecoin guidelines, together with 100% reserves held in banks.
  • The draft regulation would elevate compliance requirements throughout crypto.

While authorities broadly agree on imposing strict investor safety requirements, a chronic dispute over who must be allowed to subject stablecoins has stalled legislative progress.

According to a report from Yonhap News Agency, the Financial Services Commission (FSC) is drafting a wide-ranging Digital Asset Basic Act that may introduce sturdy safeguards for stablecoin customers.

Regulators Propose Full Reserve Custody Rules for Stablecoin Issuers

Under the proposal, issuers can be required to carry reserve belongings solely in financial institution deposits or authorities bonds and entrust 100% of these reserves to licensed custodians such as banks.

The objective, regulators say, is to insulate buyers from losses if a stablecoin issuer collapses.

By segregating reserves and putting them below third-party custody, authorities goal to forestall the spillover dangers which have plagued poorly backed digital belongings in previous market failures.

Beyond stablecoins, the invoice would considerably elevate compliance requirements throughout the crypto sector. Digital asset service suppliers can be topic to disclosure guidelines, promoting restrictions, and buyer safety necessities just like these in conventional finance.

In instances of hacks or system outages, companies might be held answerable for damages even within the absence of negligence, mirroring legal responsibility requirements utilized to on-line retail platforms.

The draft regulation may additionally reopen the door to home token fundraising. Initial coin choices (ICOs), banned in South Korea since 2017, could also be permitted for native tasks that meet strict disclosure and threat administration standards, marking a notable shift in coverage.

Despite settlement on investor protections, stablecoin regulation stays the central level of rivalry.

The Bank of Korea has pushed for a mannequin by which stablecoins are issued solely by consortia managed by banks, insisting that lenders maintain at the very least a 51% possession stake.

The central financial institution argues this strategy is critical to guard financial stability and forestall systemic dangers.

The FSC, nonetheless, has resisted setting a hard and fast possession threshold. Officials have warned that limiting issuance to bank-led constructions may sideline expertise companies and sluggish innovation in funds and digital finance.

Regulators Propose Full Reserve Custody Rules for Stablecoin Issuers

The two our bodies are additionally cut up on governance. The Bank of Korea favors creating a brand new licensing committee devoted to stablecoin oversight.

However, the FSC maintains that an extra physique can be pointless, noting that it already operates as a statutory regulator in coordination with the central financial institution and the Ministry of Economy and Finance.

This month, South Korea revealed that it’s preparing one of its most aggressive crackdowns on cryptocurrency-related monetary crime by increasing its journey rule necessities.

The new threshold covers transactions below 1 million gained ($680), which till now allowed customers to bypass id checks by breaking transfers into smaller quantities.

The publish South Korea’s Crypto Regulation Delayed as Stablecoin Rules Face Deadlock appeared first on Cryptonews.

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