South Korea’s long-awaited crypto law stalls over who can issue stablecoins

South Korea’s long-awaited Digital Asset Basic Act (DABA), a sweeping framework meant to govern crypto trading and issuance in one of Asia’s most active digital asset markets, has been delayed amid disagreements among regulators over stablecoin issuance.

The most significant disagreement centers on who should have the legal authority to issue KRW-pegged stablecoins, according to a Korea Tech Desk article. The Bank of Korea (BOK) argued that only banks with majority (51%) ownership should be permitted to issue stablecoins. It said financial institutions are already subject to stringent solvency and anti-money-laundering requirements and therefore the only ones in position to ensure stability and protect the financial system.

The Financial Services Commission (FSC), which oversees financial policy-making, is more flexible. It acknowledged the need for stability, but warned that a strict “51% rule” could stifle competition and innovation, blocking fintech firms with the technical expertise to build scalable blockchain infrastructure from participating, according to the report.

The FSC cited the European Union's Markets in Crypto-Assets regulation, in which most licensed stablecoin issuers are digital asset firms rather than banks. It also pointed to Japan’s fintech-led yen stablecoin projects as an example of regulated innovation.

The deadlock highlights a broader global debate over whether banks or fintech firms should control fiat-backed stablecoins, a decision that could shape competition, innovation and monetary oversight.

The ruling Democratic Party of Korea (DPK) also opposes the BOK’s 51% rule, a Korea Times article reported last week.

“A majority of participating experts voiced concerns about the BOK’s proposal, with many questioning whether such a framework could deliver innovation or generate strong network effects,” DPK lawmaker Ahn Do-geol said. “It is also hard to find global legislative precedents in which institutions from a specific sector are required to hold a 51%.”

He said the BOK’s stability concerns could be mitigated through regulatory and technological measures, a view the lawmaker added, “is broadly shared among policy advisors”.

Foreign-issued stablecoins are also another key sticking point. According to an earlier draft of the government proposal prepared by the FSC, foreign-issued stablecoins would be allowed in South Korea if they are licensed and have a branch or subsidiary in the country. That would require issuers such as Circle, which issues USDC, the world’s second-largest stablecoin, to establish a local presence for the token to be legally used in the country.

The regulatory deadlock is expected to delay the bill’s passage until at least January, with full implementation now unlikely before 2026, according to AInvest. South Korea’s digital assets act marks a significant shift in a country that for nine years banned crypto, a stance that its financial watchdog began to soften earlier this year.