South Korea's plans to formalize crypto regulation have been delayed, as authorities confirmed that the Digital Asset Basic Law will not be submitted until 2026. This delay stems from disagreements over how stablecoins should be supervised, highlighting the complexities of regulating these assets in one of Asia's most active digital asset markets.
The Digital Asset Basic Law is intended to be the backbone of South Korea's crypto framework, with a core aim of investor protection. One significant proposal is the introduction of no-fault liability, which would make digital asset operators responsible for user losses, even without proven negligence. Another key aspect focuses on reducing systemic risk from stablecoins, requiring issuers to maintain reserves exceeding 100% of the circulating supply, held at banks or approved institutions, and separate from the issuer's balance sheet.
Stablecoins have emerged as a central point of contention in the debate. The Bank of Korea (BOK) has argued that only consortia with majority bank ownership should be permitted to issue stablecoins, citing concerns over stability and compliance. Conversely, the Financial Services Commission (FSC) has objected, stating that requiring a legal limit on bank participation might restrict innovation by discouraging technology firms from participating. The FSC advocates for a broader regulatory approach.
The delay has created uncertainty for crypto firms operating in South Korea. While there hasn't been an immediate market reaction, industry observers suggest that unclear rules may weaken investor confidence and cause firms to delay expansion or seek friendlier jurisdictions. The stalled legislation also impacts the potential reopening of domestic Initial Coin Offerings (ICOs), which could return under strict disclosure and risk management criteria.
Political dynamics are also influencing the timeline. The December 10th deadline set by South Korea's ruling party to resolve the stablecoin bill passed without resolution, underscoring the difficulty of reconciling divergent visions. The government is prioritizing alignment between regulators.
Other unresolved issues include the initial capital requirement for stablecoin issuers, with proposals ranging from 500 million won to 25 billion won. Authorities are also discussing whether the issuance and distribution of stablecoins should be structurally differentiated from cryptocurrency exchanges.
The postponement has not triggered an immediate market reaction, but it adds another layer of uncertainty for crypto firms operating in South Korea. Without a defined regulatory framework, long-term planning becomes difficult. This uncertainty often drives market consolidation. The lack of clarity has left exchanges, stablecoin issuers, and investors in a precarious position.
Despite the delay, the need for stronger investor protections is agreed upon by both government agencies and the central bank. The dispute over who should control stablecoin issuance and reserve management has stalled progress. The delay, while frustrating for market participants, has created a period of regulatory ambiguity that could favor agile investors. Investors can diversify their portfolios to hedge against either regulatory outcome. Monitoring regulatory signals is key to capitalizing on the 2026 resolution outcomes.
