Seoul, South Korea – February 2025: In a decisive move to shape its digital asset future, South Korea’s ruling Democratic Party has reached a consensus on a foundational element of its upcoming cryptocurrency legislation. The party plans to mandate that all stablecoin issuers operating in the country maintain a minimum capital reserve of 5 billion won, equivalent to approximately $3.6 million. This provision forms a core part of the tentatively titled Digital Asset Basic Act, a comprehensive framework reported by the Maeil Business Newspaper. The party aims to formally introduce the bill before the upcoming Lunar New Year holiday, marking a significant step toward formalizing the nation’s approach to crypto assets after years of deliberation and market evolution.
Decoding the Digital Asset Basic Act’s Capital Requirement
The proposed 5-billion-won capital floor represents a concrete attempt to establish financial stability and consumer protection within the volatile cryptocurrency sector, specifically targeting stablecoins. These digital assets, typically pegged to fiat currencies like the US dollar or the Korean won, are designed to maintain a stable value. However, their collapse can trigger widespread market panic, as witnessed globally with events like the Terra-LUNA crash in 2022, which originated in South Korea and caused catastrophic losses for domestic investors. The capital requirement aims to ensure that issuers have a substantial financial buffer to manage redemptions, operational risks, and potential market stress, thereby protecting users and the broader financial system from contagion.
This move aligns South Korea with a growing international trend. Jurisdictions like the European Union, with its Markets in Crypto-Assets (MiCA) regulation, and Japan have already implemented or proposed stringent capital and licensing requirements for stablecoin issuers. The $3.6 million figure, while substantial for startups, is positioned as a baseline to filter out underfunded or potentially fraudulent operators while allowing legitimate businesses to establish themselves. Analysts note that this requirement focuses on issuer solvency rather than the technical composition of the stablecoin’s reserves, which is likely to be addressed in other sections of the sprawling bill.
Legislative Process and Pending Sensitive Issues
While the capital requirement has achieved consensus, the path to a finalized Digital Asset Basic Act remains complex. The ruling party has explicitly acknowledged that more sensitive and contentious issues require further negotiation within its policy committee before the bill is finalized. Two of the most critical unresolved points directly concern the balance of power between financial authorities.
- Scope of the Bank of Korea’s Authority: A major debate centers on how much oversight and regulatory power the nation’s central bank will wield over stablecoins, especially those potentially deemed systemically important. Some factions argue for strong central bank supervision to ensure monetary stability, while others advocate for a primary role for the Financial Services Commission (FSC) to avoid stifling innovation.
- Restrictions on Major Shareholder Stakes: Another pivotal issue involves setting limits on the ownership stakes that major shareholders, including founders and large institutional investors, can hold in licensed crypto businesses. This is aimed at preventing excessive control and potential market manipulation, mirroring regulations in traditional finance.
The party’s strategy appears to be one of sequential finalization: securing agreement on less controversial, foundational pillars like the capital floor first, to build momentum before tackling the more politically and technically challenging debates. The goal of introduction before the Lunar New Year provides a clear, public deadline for this initial phase.
Historical Context: From Reaction to Proactive Framework
South Korea’s journey to this legislative moment is deeply rooted in its unique crypto history. The country emerged as one of the world’s most vibrant and retail-investor-driven cryptocurrency markets in the late 2010s. This fervor, however, was met with a series of reactive measures. Following the 2017 boom, authorities banned anonymous trading and Initial Coin Offerings (ICOs). The devastating collapse of the Terra ecosystem in 2022, founded by Korean entrepreneur Do Kwon, acted as a profound catalyst. It exposed critical vulnerabilities and accelerated political and regulatory urgency to build a safer, more transparent market.
The Digital Asset Basic Act, therefore, represents a shift from piecemeal reaction to comprehensive governance. It seeks to consolidate various rules and proposals that have circulated in recent years into a single, coherent law. The act is expected to cover not just stablecoins but also the classification of other digital assets, exchange operations, investor protection standards, and penalties for market abuse. The proposed capital requirement for stablecoin issuers is a foundational piece of this much larger puzzle, setting a clear financial bar for entry into a high-risk segment of the market.
Implications for the Crypto Industry and Global Standards
The establishment of a $3.6 million capital floor will have immediate and long-term consequences for the digital asset landscape in South Korea and beyond. For domestic stablecoin projects, this creates a definitive compliance target. Well-funded entities, including subsidiaries of traditional financial institutions or large tech firms (“big tech”), may find this a manageable hurdle. In contrast, smaller startups may face significant challenges in raising the necessary capital, potentially leading to market consolidation where only the most robust players survive.
Internationally, South Korea’s move contributes to the ongoing formation of a global regulatory baseline for digital assets. As a major, technologically advanced economy with deep crypto market penetration, its regulatory choices carry weight. Other nations in the Asia-Pacific region observing this process may see South Korea’s model as a reference point, especially its attempt to balance innovation with stringent consumer safeguards. Furthermore, it pressures existing global stablecoin issuers, such as Tether (USDT) or Circle (USDC), to carefully assess their operational and compliance strategies if they wish to serve the Korean market directly, potentially requiring them to establish locally capitalized entities.
The table below provides a simplified comparison of the proposed Korean rule with other major regulatory frameworks:
| Jurisdiction | Regulatory Framework | Key Capital/Licensing Approach |
|---|---|---|
| South Korea (Proposed) | Digital Asset Basic Act | 5 billion won ($3.6M) minimum capital for issuers |
| European Union | Markets in Crypto-Assets (MiCA) | Stablecoin-specific license with capital & reserve requirements |
| Japan | Payment Services Act | Banking-level licensing for stablecoin issuers |
| United States | State-by-state & Federal proposals | Fragmented; proposals include bank charters or state licenses |
Conclusion
The South Korean ruling party’s consensus on a $3.6 million capital requirement for stablecoin issuers marks a pivotal moment in the country’s financial regulatory evolution. It signals a determined move from post-crisis reaction toward establishing a proactive, structured, and safety-oriented framework through the Digital Asset Basic Act. While critical details regarding central bank authority and ownership limits remain unresolved, the setting of this clear financial benchmark provides much-needed certainty for one segment of the crypto industry. As the legislation progresses, its final form will not only define the future of South Korea’s stablecoin regulation but also offer a significant case study for how technologically advanced economies can integrate digital assets into their formal financial ecosystems with measured rigor.
FAQs
Q1: What is the Digital Asset Basic Act?
The Digital Asset Basic Act is a comprehensive cryptocurrency legislation being drafted by South Korea’s ruling party. It aims to establish a unified legal framework for digital assets, covering issuance, trading, investor protection, and oversight, with the stablecoin capital requirement being one of its first agreed-upon provisions.
Q2: Why is a $3.6 million capital floor considered important?
The capital requirement is designed to ensure stablecoin issuers have sufficient financial resources to manage redemptions and operational risks. It acts as a barrier to underfunded or unreliable operators, aiming to protect consumers and prevent systemic market failures like the 2022 Terra-LUNA collapse.
Q3: When will this law come into effect?
The ruling party plans to formally introduce the bill before the Lunar New Year holiday. However, it must then go through the full legislative process, including committee reviews, potential amendments, and votes in the National Assembly, meaning the final enactment and effective date could be months later.
Q4: How does this compare to regulations in other countries?
South Korea’s approach aligns with a global trend of tightening stablecoin rules. It is similar in intent to the EU’s MiCA regulation and Japan’s strict licensing regime, though the specific capital amount and regulatory structure have unique national characteristics.
Q5: What issues are still being debated in the bill?
Key unresolved issues include defining the scope of the Bank of Korea’s authority over stablecoins and setting restrictions on the ownership stakes that major shareholders can hold in licensed cryptocurrency businesses. These are considered more politically sensitive than the capital floor.
