South Korean Crypto Regulations Delayed as Stablecoin Rules Face Impasse

South Korea’s next major step toward comprehensive crypto regulation has been pushed back to 2026 as regulators remain divided over how the issuance of stablecoins should be controlled.

While authorities largely agree on imposing strict investor protection standards, a protracted dispute over who should be allowed to issue stablecoins has blocked legislative progress.

According to a report from Yonhap News Agency, the Financial Services Commission (FSC) is drafting a broad digital asset foundation law that would introduce strong safeguards for stablecoin users.

Regulators Propose Comprehensive Custody Rules for Stablecoin Issuers

Under the proposal, issuers would be required to hold their reserve assets entirely in the form of bank deposits or government bonds and entrust 100% of these reserves to approved custodians such as banks.

The goal, according to regulators, is to protect investors from losses in the event of the collapse of a stablecoin issuer.

By separating the reserves and placing them in third-party custody, authorities aim to prevent the risk of fallout that has affected poorly collateralized digital assets during past market failures.

Beyond stablecoins, the bill would significantly increase compliance standards across the crypto industry. Digital asset service providers would be subject to disclosure rules, advertising restrictions, and customer protection requirements similar to those in traditional finance.

In the event of a hack or system failure, businesses could be held liable for damages even in the absence of negligence, similar to liability standards applied to online retail platforms.

The bill could also reopen the door to token fundraising at the national level. Initial coin offerings (ICOs), banned in South Korea since 2017, could be allowed for local projects that meet strict disclosure and risk management criteria, marking a notable policy shift.

Despite the agreement on investor protection, the regulation of stablecoins remains the central point of contention.

The Bank of Korea has advocated a model in which stablecoins would be issued only by bank-controlled consortia, insisting that lenders hold at least 51% of the stake.

The central bank says this approach is necessary to protect monetary stability and prevent systemic risks.

The FSC, however, has been reluctant to set a fixed ownership threshold. Officials have warned that limiting issuance to bank-led structures could marginalize technology companies and slow innovation in payments and digital finance.

Regulators Propose Comprehensive Custody Rules for Stablecoin Issuers

The two bodies are also divided on governance. The Bank of Korea supports the creation of a new licensing committee dedicated to monitoring stablecoins.

However, the FSC maintains that an additional body would be unnecessary, emphasizing that it already functions as a statutory regulator in coordination with the central bank and the Ministry of Economy and Finance.

This month, South Korea revealed it was preparing one of its most aggressive crackdowns on cryptocurrency-related financial crime by expanding its travel rule requirements.

The new threshold covers transactions below 1 million won ($680), which until now allowed users to bypass identity checks by splitting transfers into smaller amounts.

The article South Korea’s Crypto Regulations Delayed as Stablecoin Rules Face Impasse appeared first on Cryptonews.

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