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Crypto industry voices concern over regulations on stablecoins
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By Jun Ji-hye
Virtual asset industry officials are raising concerns that a bill requiring prior approval from financial authorities to issue stablecoins — set to be submitted to the National Assembly as early as this month — could hinder Korea's development of a stablecoin ecosystem.
The officials said Monday that excessive regulations could also create an uneven playing field for domestic issues compared to their foreign counterparts.
Stablecoins are digital currencies designed to maintain a stable value by being tied to central bank-issued currencies, such as the U.S. dollar, or to physical assets like gold.
Tether (USDT) and USD Coin (USDC), both pegged one-to-one to the U.S. dollar, are among the most widely used stablecoins.
According to industry officials and political sources, Rep. Min Byoung-dug of the Democratic Party of Korea is preparing to introduce the Digital Asset Basic Act.
Rep. Min Byoung-dug, center, of the Democratic Party of Korea, speaks during a meeting with the Homeplus labor union and in-store tenants at the National Assembly in Seoul, March 13. Yonhap
The draft bill classifies digital assets into stablecoins and nonstablecoins. It requires prior approval from the Financial Services Commission (FSC) for the issuance of stablecoins, while permitting the issuance of other virtual assets through a notification process.
While the Virtual Asset User Protection Act, which took effect last July, focused on user protection and the obligations of exchanges, the new bill takes a more comprehensive approach, seeking to establish oversight across the entire virtual asset ecosystem, including issuance and listing.
As such, this is regarded as the second stage of legislation, marking the beginning of a full-fledged regulatory framework.
The industry acknowledged the need for the regulatory framework, but noted that it should be designed to be favorable to the market, especially in the early stages, to foster the growth and innovation of the domestic blockchain and cryptocurrency sectors.
“Regulations in the early stages should be designed to create opportunities, not stifle the industry. If regulations are introduced before clear economic use cases emerge, their effectiveness may be limited,” an official in the cryptocurrency industry said.
Additionally, complaints are arising that it is unfair to require approval solely from domestic companies, especially when offshore stablecoins, such as Tether, are actively traded in the domestic market without being subject to local regulations.
“Imposing excessive requirements on domestic operators alone will inevitably put them at a disadvantage in global competition,” another industry official said.
The FSC, the country’s top financial regulator, explained that it would proceed with reviewing the details of the second-phase legislation as planned through coordination with relevant agencies, aiming to complete the process in the second half of this year.
“In light of the growing volatility in the virtual asset market, we will continue to enhance monitoring across the virtual asset sector, including stablecoins, to protect users,” an FSC official said.