South Korea Advances Crypto Regulation With Stablecoin Legalization and Potential Bitcoin ETF Launches
South Korea’s ruling Democratic Party, led by President Lee Jae-myung, has moved to legalize stablecoin issuance with the introduction of the Digital Asset Basic Act. The bill mandates that local firms hold at least 500 million KRW ($368,000) in equity, retain sufficient reserves, and secure approval from the Financial Services Commission before issuing stablecoins. This legislative move is designed to increase transparency, strengthen competition, and attract institutional investors to the Korean crypto market. Alongside stablecoins, President Lee has pledged to allow crypto investment funds and explore Bitcoin ETF listings, further cementing South Korea’s position as a growing digital asset hub. The Bank of Korea, however, remains concerned that privately issued stablecoins could undermine monetary policy and advocates for regulatory oversight. Stablecoin trading volume reached $42 billion in Q1 2024, with over a third of the population participating in crypto trading. News of regulation has propelled digital finance stocks like KakaoPay upward, yet analysts urge caution due to lingering uncertainties around policy implementation and long-term market sustainability.
Bullish
The proposed legalization of stablecoins and potential approval of Bitcoin ETFs signal a positive regulatory shift in South Korea’s digital asset market. These initiatives are likely to boost institutional and retail participation, legitimize the crypto sector, and increase trading activity, as seen by the surge in stablecoin volumes and digital asset stocks. While the central bank’s concerns and policy uncertainties remain, the overall move is interpreted as market-positive in both the short and mid-term, with increased investor optimism and heightened trading activity around related cryptocurrencies. Long-term risks may endure if regulatory guidelines are delayed or altered, but for now the sentiment is bullish.