South Korea’s Crypto Regulation Faces Delay Amid Stablecoin Issuer Dispute

Highlights:

• Stablecoin issuer disputes delay South Korea’s crypto regulation until 2026.
• Stablecoin rules demand 100% reserves in banks for investor protection.
• Lawmakers propose a separate bill as government discussions stall.

South Korea’s crypto regulation has reached a dead end as the authorities argue over the issuers of stablecoins. The Digital Asset Basic Act was intended to be passed by the authorities soon. However, this progress has stalled as a result of the differences between the Bank of Korea and the Financial Services Commission (FSC), as reported by the Yonhap news agency.

Although protecting the investors is backed by both sides, controversies remain on the ownership requirements of the issuers of stablecoins. The Bank of Korea prefers consortia having 51% in the bank stake to issue stablecoins. Conversely, the FSC feels that this rule would curb innovation. It supports broader involvement, such as tech companies.

South Korea's KRW stablecoin framework is experiencing major delay.

Reason? Clash over who should be allowed to issue stablecoins.

The BOK insists issuance should center around local banks, while FSC supports the participation of tech companies. pic.twitter.com/LsDtyX8u4z

— Danny Kunwoong Park (@ParkKunwoong) December 30, 2025

Strict Rules Proposed for Stablecoin Reserves

Regulators suggest a full reserve custodial model to safeguard investors. The issuers of stablecoins should have 100% of reserves in banks or government bonds. They should also delegate these assets to licensed custodians. This is to protect investors in case of the collapse of issuers.

The government plans to restrict the management of reserve assets. The investments should be in secure financial instruments such as deposits or state bonds. These measures are taken on the grounds of global fears of the ripple effect of poorly backed stablecoins.

In addition, service providers are subject to strict liability under the law. In case of hacking or failure of systems, they will be required to compensate users regardless of the fault. This is similar to the regulations imposed on online retailers under the Electronic Financial Transactions Act of South Korea.

Domestic ICO Ban Might Be Lifted

The law might also lift the 2017 prohibition against domestic initial coin offerings (ICOs) in South Korea. Local projects might attract funding in case they pass tough disclosure and risk management criteria. Earlier on, most companies had avoided this prohibition by pre-issuing tokens abroad prior to domestic listings.

Moreover, the suggested bill brings about high compliance levels. Crypto operators are now expected to adhere to regulations just like their counterparts in traditional finance. This involves disclosure requirements, terms of service, and limitations on advertising.

Still, key problems have not been addressed yet, delaying the submission of the law to 2026. Approval of issuers of stablecoins is one of the central arguments. A new decision-making committee is supported by the Bank of Korea. However, the FSC claims it has all the agencies required, such as the central bank and the finance ministry. The government lifted the ban restricting venture capital investment in crypto firms in September. This move enabled these startups to seek official venture certification.

South Korea to Lift the Ban on Crypto Company VC Investments on September 16

According to HashNews, citing Cryptonews, South Korea's Ministry of SMEs and Startups announced that it will officially lift the ban on September 16 on venture capital (VC) investments in companies…

— HashNews👩🏻‍🌾 (@HashNews01) September 11, 2025

Lawmakers Step In With Alternative Draft

As a result of ongoing delays, the ruling party’s Digital Asset Task Force started drafting a new bill. It intends to integrate recommendations of ongoing legislator-led initiatives. This parallel plan aims to continue the momentum as the official version stalls.

The other controversial topic is the capital requirement of the issuers of the stablecoins. The current proposals are between 500 million and 25 billion won. Meanwhile, regulators also consider the need for issuance and distribution separation within exchanges.

Despite the slowdown, private companies are still experimenting with the use of stablecoins. A recent trial by BC Card enabled foreign customers to use stablecoins by making payments through QR-based conversions. The pilot plans to promote future frameworks and establish local preparedness for compliant stablecoin frameworks.