South Korea’s newly elected president, Lee Jae-myung, is swiftly acting on his campaign promise to permit the issuance of domestic stablecoins. His ruling Democratic Party has introduced a new cryptocurrency bill to that effect.
According to Bloomberg, the proposed Digital Asset Basic Act, unveiled on Tuesday, aims to enhance transparency and promote competition within the crypto industry.
Under the bill, South Korean firms would be allowed to issue stablecoins, provided they have a minimum equity capital of 500 million won (approximately $368,000). Additionally, issuers must secure regulatory approval from the Financial Services Commission and maintain sufficient reserves to guarantee refunds.
Stablecoin trading in South Korea is on the rise, with transactions involving major U.S. dollar-pegged stablecoins totaling 57 trillion won (about $42 billion) across the country’s five leading exchanges in the first quarter, according to data from the Bank of Korea.
The newly proposed legislation is expected to further fuel this growth, strengthening one of Asia’s largest crypto markets. Reports indicate that over a third of South Korea’s population—around 18 million people—are actively involved in cryptocurrency trading.
Lee Moves to Deliver on Campaign Promises
Opposition leader Lee was sworn in as South Korea’s president on June 3, following a decisive victory in a snap election.
Beyond his push for a domestically issued stablecoin, Lee has also voiced support for allowing the national pension fund to invest in Bitcoin and other cryptocurrencies. He has further pledged to enable the launch of Bitcoin exchange-traded funds (ETFs) within the country.
“We must develop a stablecoin market backed by the Korean won to stop national wealth from flowing abroad,” Lee stated during a policy discussion in May.
Bank of Korea Voices Opposition to Stablecoin Policy
Lee’s crypto agenda is encountering resistance from the Bank of Korea, with Governor Rhee Chang-yong cautioning that stablecoins issued by non-banking entities could undermine the effectiveness of monetary policy.
The central bank has insisted it should play the primary role in overseeing the regulation of any won-backed stablecoin.
Investor caution also lingers following the dramatic collapse of the Terra blockchain and its algorithmic stablecoin in May 2022. The project, co-created by South Korean developer Do Kwon, wiped out billions in value and left a lasting impact on the country’s crypto market.
South Korean Crypto Stocks Respond to Policy Developments
South Korea’s renewed crypto momentum is driving a surge in local stocks, with mobile payment and digital wallet provider KakaoPay seeing its shares soar by as much as 45% over the past five days, according to Google Finance.
However, JPMorgan analysts Stanley Yang and Jihyun Cho cautioned that “the rally in Kakao-related shares is fundamentally unjustifiable, as any tangible benefit from Lee’s stablecoin policy is still unclear.”
