South Korea to Lift 7-Year ICO Ban, Drafts Rules for Domestic ICOs and Stablecoins
South Korea is preparing to lift its seven-year ban on domestic initial coin offerings (ICOs) by drafting the second phase of the Digital Asset Basic Act, potentially effective in 2025. The draft aims to allow onshore ICO fundraising under mandatory information-disclosure rules—requiring projects to publish team credentials, technology details, use of funds and risk factors—bringing token sales under local regulatory oversight. The law also targets stablecoins: major overseas stablecoins such as USDT and USDC would be barred from domestic trading unless issuers establish a local presence and comply with South Korean AML and capital reserve requirements. Regulators say proposals are not final and remain under interagency review. Expected benefits include retaining blockchain projects and protecting local investors; challenges include enforcement costs, monitoring requirements and potential short-term liquidity disruption on exchanges. The Financial Services Commission (FSC) is coordinating discussions; the timeline for passage and exact provisions may change before parliamentary review.
Bullish
Allowing regulated domestic ICOs and requiring localization/compliance for major stablecoins reduces regulatory arbitrage and brings more token issuance and fundraising onshore. For traders, this is bullish because: 1) it can increase local project supply and listing activity on Korean exchanges, boosting trading volumes and token demand; 2) clearer disclosure rules lower fraud risk and may attract institutional participation; 3) stablecoin localization could encourage KWR-pegged products and more regulated liquidity. Short-term volatility is likely around rule implementation and any abrupt delistings or stablecoin access changes, potentially reducing liquidity temporarily (neutral-to-negative short-term). Historically, regulatory clarity (e.g., licensing frameworks in other jurisdictions) has tended to be net positive for market growth and institutional inflows over the medium to long term. Overall, the move signals regulatory maturation that supports healthier market development, hence a bullish outlook.