Digital Asset Basic Act proposed to bolster Korea as global leader of Web3: expert

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Allo CEO Kingsley Advani / Courtesy of Allo

Korea’s Digital Asset Basic Act can be aligned with European Union Markets in Crypto-Assets Regulation (MiCA) requirements for transparency, custody and disclosure, facilitating cross-border access to tokenized markets, according to a blockchain-based settlement service provider expert.

The Korean bill, proposed by Rep. Min Byoung-dug of the ruling Democratic Party of Korea (DPK) in June, outlines the legal definition and regulatory framework of the digital asset industry.

This bill defines digital assets as “electronically transferable” and “created and stored using distributed ledger technology.” It categorizes virtual assets into two main types: stablecoins and general digital assets.

The bill seeks to provide clear guidelines on how digital assets should be treated in the legal system, regulations while ensuring transparency, security and accountability within the growing industry of digital assets.

MiCA is a regulatory framework introduced by the EU to regulate digital assets and cryptocurrencies. Initially proposed in 2020, it was approved by the European Parliament in 2023. It seeks to regulate the crypto market, provide legal clarity and ensure consumer protection while promoting a single European market for digital assets.

“Bilateral agreements or regulatory sandboxes could bridge the gap between Korea’s rules and the U.S. frameworks, making market access smoother,” said Kingsley Advani, CEO of Allo. Advani is a British tech entrepreneur and serial investor, known for his early investments in unicorns including SpaceX, Solana, Coinbase, Robinhood and eToro.

The U.S. frameworks he refers to include the Securities and Exchange Commission and Commodity Futures Trading Commission. The former regulates the securities industry, including stocks, bonds and other financial instruments, while the latter regulates futures, options and swaps markets, overseeing transactions involving commodities and financial instruments like derivatives.

“By strengthening its licensing regime, Korea can solidify its role as a regional hub for digital assets, although achieving true global harmonization will require loosening certain restrictions around foreign custody and control,” he said.

The proposed bill, with its licensing regime for stablecoin issuers, is a forward‑thinking piece of legislation that positions Korea as a serious player in Web3 finance, Advani added.

Web3 refers to the next generation of the internet, focusing on decentralization, blockchain technology and user empowerment. It represents a shift away from Web2, where services and data are traditionally controlled by centralized entities including Big Tech companies like Google, Facebook and Amazon.

“The initiative, including KB Kookmin Bank’s trademark filings and the planned joint venture among leading Korean banks for Korean won-denominated stablecoins, reflects the nation’s ambition to build a regulated, competitive and globally connected digital asset marketplace,” he said.

“It also dovetails with President Lee Jae Myung’s pro‑crypto policies, making Korea a strong candidate for regional leadership in the digital currency space.”

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The Bank of Korea (BOK) is strongly opposing private sector-led won-based stablecoins. It says financial stability will be undermined and the increased possibility of coin runs will derail the financial system.

Advani acknowledged the BOK concerns about financial stability and potential run risks.

However, in his view well-regulated won‑based stablecoins can be structured with stringent reserve requirements, regular audits and robust risk controls that mitigate these concerns.

“The BOK concerns are understandable, especially given the lessons learned from global stablecoin failures. However, done right, won‑based stablecoins could expand the currency’s global use and support innovation in decentralized finance, yielding benefits akin to those the U.S. dollar has seen from its own stablecoin ecosystem.”

The so‑called “Korea discount,” a chronic undervaluation of Korean equities, will be reduced, buoyed by global liquidity flowing into the Korea Exchange through on‑chain settlement, he added.

On-chain settlement refers to the process of executing and recording transactions directly on a blockchain.

It involves the transfer of assets like cryptocurrency, tokens or other digital assets from one party to another, with details of the transactions publicly recorded on the blockchain.

“The blockchain-mediated transaction method eliminates traditional delays and aligns pricing more closely with international standards,” he said. “By reducing friction and making it easier for foreign investors to trade and settle Korean equities, it can help and support higher valuations.”

Advani stressed that retail adoption of digital assets depends on standardized, global rules for auditing, tax and investor protection.

“Part of the issue is around the regulatory framework that applies to Real World Assets (RWA),” he said.

Jurisdictions will have significantly different approaches as to what RWA are and how they should be regulated, in his view.

Audits must evolve toward on‑chain transparency and real‑time reporting, while taxes require a unified global approach that treats tokenized assets consistently across jurisdictions.

“Investor protection standards must evolve to ensure one‑to‑one backing of tokenized assets, establish robust custody protocols and enforce stringent AML (anti-money laundering) and Know Your Customer measures,” Advani said.