South Korea’s ruling Democratic Party has introduced the Digital Asset Basic Act, a landmark bill to legalize domestic stablecoin issuance and establish comprehensive crypto regulations. The legislation requires issuers to maintain minimum capital of 500 million won ($368,000) and full reserve backing, while creating new oversight mechanisms for the nation’s 18 million crypto users.
The proposal comes one week after President Lee Jae-myung’s inauguration, fulfilling his campaign promise to modernize digital asset regulations. Bank of Korea data reveals $42 billion in stablecoin transactions occurred on local exchanges during Q1 2025, highlighting the market’s rapid growth.
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President Lee’s Progressive Crypto Agenda
Lee’s administration is implementing one of Asia’s most crypto-friendly regulatory frameworks since taking office on June 3. The president previously advocated for national pension fund investments in Bitcoin and pushed for local Bitcoin ETF approvals during his campaign.
“We need to establish a won-backed stablecoin market to prevent national wealth from leaking overseas,” Lee stated during a May policy forum. His party’s legislation specifically targets reducing dependence on US dollar-pegged stablecoins like Tether (USDT) and USD Coin (USDC).
The Digital Asset Basic Act Explained
The proposed law introduces three key requirements for stablecoin issuers:
| Requirement | Details |
|---|---|
| Minimum Capital | 500 million won ($368,000) |
| Reserve Backing | 100% collateral in cash/cash equivalents |
| Approval Process | Financial Services Commission authorization |
A new Presidential Digital Asset Committee will oversee market development and coordinate policy between regulators. The legislation also defines legal consequences for market manipulation including pump-and-dump schemes and rug pulls.
KakaoPay Surges 18% on Regulatory Clarity
Shares of fintech giant KakaoPay Corp soared following the announcement, reflecting investor confidence in South Korea’s crypto sector expansion. The company is reportedly developing infrastructure to support won-pegged stablecoin transactions through its payment platforms.
Market analysts attribute the rally to expectations that KakaoPay could become a licensed stablecoin issuer. “This legislation creates opportunities for tech firms to capture value from blockchain-based financial services,” said Seoul-based analyst Kim Ji-hoon.
Kaia Announces Won-Pegged Stablecoin
Layer-1 blockchain Kaia confirmed plans to launch KRW₩, a South Korean won-pegged stablecoin, within six months. The Kakao-backed platform aims to leverage new regulations to establish dominance in decentralized finance (DeFi) applications.
Kaia’s technical lead Park Min-seo stated: “Our stablecoin will enable frictionless cross-border payments while maintaining parity with Korea’s monetary policy.” The project has partnered with three domestic commercial banks to ensure liquidity and redemption capabilities.
Central Bank Raises Monetary Policy Concerns
Bank of Korea Governor Rhee Chang-yong opposes private stablecoin issuance, arguing it could complicate monetary control. The central bank prefers a CBDC approach, with plans to pilot a digital won in 2026.
Despite this resistance, lawmakers appear determined to proceed. “Private innovation and public oversight can coexist,” said bill sponsor Rep. Min Byeong-deok. “Our framework ensures stability without stifling financial technology advancement.”
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Market Impact and Global Implications
The legislation positions South Korea as Asia’s second major economy after Japan to establish clear stablecoin rules. Crypto exchanges report increased trading volume for KLAY (Kaia’s native token) and renewed international investor interest in Korean blockchain projects.
- Stablecoin
- A cryptocurrency pegged to a stable asset like fiat currency, designed to minimize price volatility.
- Digital Asset Basic Act
- South Korea’s proposed legislation establishing regulatory frameworks for cryptocurrencies and stablecoins.
- Financial Services Commission
- South Korea’s top financial regulator overseeing banking, insurance, and securities markets.
- Tokenized Securities
- Digital representations of traditional financial instruments like stocks or bonds using blockchain technology.
