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

11 hours ago7 min read

The long-awaited legislative framework to regulate South Korea’s burgeoning crypto market has hit a significant and familiar roadblock: a political stalemate over who gets the coveted right to issue stablecoins. This isn't just a minor bureaucratic hiccup; it's a fundamental clash of visions for the future of finance, pitting the conservative, fortress-like world of traditional banking against the agile, disruptive ethos of fintech and blockchain-native firms.At the heart of the delay is a fierce debate within the National Assembly. On one side, there are powerful voices, often aligned with the financial establishment, arguing that only licensed banks—with their deep reserves, stringent capital requirements, and long history of regulatory oversight—should be entrusted with issuing these digital currencies pegged to stable assets like the Korean won.Their argument hinges on systemic risk and consumer protection, warning that allowing less-regulated entities into this space could create a dangerous parallel financial system, a potential house of cards that could collapse and trigger contagion. They point to global cautionary tales, like the Terra-Luna meltdown that originated in South Korea, as a stark reminder of what happens when innovation outpaces guardrails.On the opposing front, a coalition of fintech companies, crypto exchanges, and blockchain advocates is pushing back hard. They argue that such a restrictive, bank-only model would strangle innovation in its crib, effectively handing a monopoly to incumbent institutions that have been slow to embrace digital asset technology.They contend that with smart, risk-proportional regulation—such as rigorous reserve auditing, transparency mandates, and operational licensing—non-bank entities can safely and efficiently issue stablecoins, fostering greater competition, lower costs, and more inclusive financial services. This camp sees stablecoins not merely as digital cash, but as the essential plumbing for a new internet of value, crucial for everything from seamless cross-border payments and decentralized finance (DeFi) applications to the tokenization of real-world assets.The political impasse means that the Virtual Asset User Protection Act, which was celebrated as a landmark first step when it came into effect last year, remains incomplete. That act focused primarily on punishing fraud and setting basic exchange rules, but it deliberately kicked the complex issue of stablecoin issuance to a separate, follow-up law—the one now stuck in legislative limbo.This delay has real-world consequences. It creates regulatory uncertainty that stifles investment, as both domestic startups and international giants hesitate to commit resources without clear rules of the road.

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#South Korea

#stablecoin regulation

#crypto law

#issuance rights

#legislative delay

#financial authorities