The South Korean government is set to introduce stringent regulations on dollar-pegged stablecoins, emphasizing the importance of cross-border transactions in the evolving digital asset landscape. The Ministry of Strategy and Finance has announced its intention to reassess existing strategies to enhance the reliability of cross-border digital asset transfers associated with stablecoins.
The regulatory framework aims to address the growing significance of stablecoins in facilitating cross-border transactions and global transfers. By applying foreign exchange regulations to these dollar-pegged assets, South Korea seeks to establish specific guidelines that will ensure the stability and security of such transactions. The Ministry's proactive approach reflects its commitment to aligning stablecoin usage with existing financial regulations.
The Financial Services Commission (FSC), South Korea's primary financial regulatory body, has prioritized stablecoins as part of the second legislative phase of the country’s Virtual Asset User Protection Act. This act aims to create a safer environment for users involved in virtual asset transactions and will include consultations with other international regulators. Potential partners for these discussions include regulatory bodies from Japan and the European Union (EU), although no specific timelines for these consultations have been provided.
In addition to the stablecoin regulations, South Korea plans to introduce legal tokens tied to the South Korean Won, marking a significant step in the country's digital currency landscape. These tokens will be closely monitored as part of the broader regulatory initiative aimed at ensuring user protection and enhancing the overall integrity of the crypto market.
In August, South Korea enacted the Virtual Asset User Protection Act, which mandates domestic crypto exchanges—such as Upbit, Bithumb, and Coinone—to pay a supervisory fee based on their operating revenue. Starting January 1, 2025, virtual asset operators will be required to pay these fees, which will be determined by their income from the previous fiscal year.
The new regulations also stipulate that crypto exchanges must keep at least 80% of users’ assets in cold storage, separate from the exchange’s operational funds. This requirement is designed to minimize risks and protect users’ investments. Additionally, these assets must be invested in “risk-free” instruments, further safeguarding user funds.
Exchanges will be required to regularly review their listed assets, assessing their circulation and the accuracy of their whitepapers. Any assets that do not meet the specified criteria will face delisting, reinforcing the commitment to maintaining a reliable and secure trading environment.
South Korea's regulatory changes signify a robust response to the growing influence of stablecoins and digital assets in the global financial system. By prioritizing cross-border transactions and implementing comprehensive oversight measures, the government aims to ensure the stability and reliability of its digital asset landscape. As these regulations unfold, they will undoubtedly shape the future of cryptocurrency trading and usage in the region, setting a precedent for other nations to follow.
October 2024, Cryptoniteuae