South Korea moves to regulate stablecoins

South Korea is preparing to tighten oversight of digital assets through a proposed law that would bring stablecoins and tokenised real-world assets under existing financial regulations. A draft of the “Digital Asset Basic Act”, obtained by local media, outlines a framework that integrates parts of the crypto sector into the country’s current legal system rather than creating entirely new rules.

The draft, developed by the ruling Democratic Party’s Digital Asset Task Force, has been under discussion for months. Disagreements over stablecoin oversight and issuer requirements delayed its release, pushing it into 2026.

Stablecoins to fall under foreign exchange rules

As reported by Seoul Economic Daily, a key feature of the draft bill is the classification of stablecoins used in cross-border transactions as payment instruments under South Korea’s Foreign Exchange Transactions Act. This move would place stablecoin activity under the supervision of foreign exchange authorities.

Under the proposed rules, businesses dealing with stablecoins would not need separate registration but would instead follow existing foreign exchange regulations. This marks a shift from the current framework, where stablecoins are treated as virtual assets and primarily regulated through anti-money laundering and counter-terrorism financing requirements.

At present, regulatory obligations focus mainly on intermediaries such as exchanges. These entities must register, conduct know-your-customer checks and monitor transactions. Issuers, however, face limited direct oversight.

According to Seoul Economic Daily, the draft law aims to change that. It introduces issuer-level responsibilities, including the need for regulatory approval, reserve requirements and backing by high-quality liquid assets. Issuers may also be required to guarantee redemption at face value and comply with rules similar to those applied to banks or payment institutions.

The bill also proposes controls on cross-border transfers, including reporting obligations for large transactions. However, it includes an exemption for smaller payments related to goods and services, allowing routine transactions to continue without heavy reporting requirements.

No interest payments on stablecoins

The draft legislation also addresses the issue of stablecoin yields. It proposes a ban on issuers offering interest or returns to holders of stablecoins. This aligns with similar regulatory approaches seen in other markets.

Authorities have raised concerns that offering yields could increase financial risks and blur the line between stablecoins and traditional financial products.

Focus on interoperability and market stability

The Financial Services Commission would be tasked with setting technical standards to ensure interoperability across digital asset systems. The aim is to prevent fragmentation in liquidity if multiple Korean won stablecoins are issued across different blockchain networks.

This concern reflects broader warnings from policymakers about the potential impact of stablecoins on capital flows and foreign exchange stability.

Backed by trusted custody

The draft bill also introduces new rules for tokenised real-world assets. It states that any issuer of such assets must hold the underlying assets in a managed trust under the Capital Markets Act.

This requirement would strengthen investor protection by ensuring that tokenised assets are backed by real holdings secured within established custody frameworks. Details of the trust arrangements are expected to be defined later through a presidential decree.

South Korea has already taken steps to regulate security-like tokens under existing capital markets law. These tokens must be issued through licensed intermediaries. The new proposal expands this approach by linking a broader range of tokenised assets to established financial rules.