South Korea Misses Stablecoin Bill Deadline: The Clash Between Banks and Innovation Intensifies

South Korea's attempt to legalize won-pegged stablecoins faces another setback as the deadline for a proposed bill is missed. The ongoing dispute between the Financial Services Commission (FSC) and the Bank of Korea highlights the struggle for control over digital finance in the country.

Key Takeaways

The Financial Services Commission (FSC) missed a crucial deadline set for December 10 to submit a stablecoin bill.
A disagreement over stablecoin issuance control exists between the FSC and the Bank of Korea.
Delays in establishing stablecoin regulations may hinder South Korea’s competitiveness in the digital finance sector.
Domestic issuance of stablecoins remains illegal in South Korea, despite ongoing efforts from various companies to develop the necessary infrastructure.

South Korea Misses Stablecoin Bill Deadline: The Clash Between Banks and Innovation Intensifies

South Korean Stablecoin Bill Delayed by Regulatory Disputes

South Korea's goal of legalizing won-pegged stablecoins has encountered a significant setback after the nation’s top financial regulator failed to meet a government-imposed deadline. This situation reveals a growing tension between financial authorities regarding the control of the next phase of digital finance.

Earlier this month, the ruling Democratic Party requested that the Financial Services Commission (FSC) present a draft stablecoin bill by December 10. This was part of President Lee's campaign promise to create a legal framework for digital assets. However, that deadline passed without any submission.

Stablecoin Dispute Halts Progress on Cryptocurrency Legislation

According to a report from South Korean media outlet Newsis, the FSC acknowledged that it could not deliver the proposal on time, emphasizing the need for further coordination with other agencies.

A spokesperson for the FSC stated that the regulator would publicly communicate the government’s position alongside its official submission to the National Assembly, highlighting the public's right to be informed about the proposed framework.

The FSC is currently drafting a proposal tentatively titled the Basic Digital Asset Act, which is being viewed as the second phase of South Korea’s legislation concerning virtual assets. Officials anticipate that this proposal will be released by the end of this month or early next month, in preparation for a consolidated bill that the ruling party aims to introduce in January 2026, fulfilling commitments made during President Lee Jae-myung's campaign.

The root of the delay lies in an ongoing dispute between the FSC and the Bank of Korea (BOK) regarding stablecoin issuance control. The central bank argues that stablecoins operate similarly to currency and deposit-like instruments, thus should remain under its control. It advocates for regulations requiring domestic banks to hold at least a 51% stake in any issuing entity, along with authority to inspect and approve these entities.

On the other hand, the FSC opposes this approach, pointing to international examples where most issuers under the European Union’s MiCA framework are non-bank digital asset firms. The first yen-linked stablecoin in Japan was also issued by a fintech company, illustrating successful alternatives to bank-led issuance.

FSC officials argue that requiring banks to lead stablecoin issuance lacks global precedent and could hinder participation from tech firms that are integral to digital payment systems.

Negotiations between the FSC and the BOK are still ongoing, with insiders suggesting that a compromise may involve flexible ownership stakes based on business operations, though no formal agreement has been reached.

This unresolved disagreement has delayed coordination long enough for lawmakers to begin examining several competing drafts within the National Assembly’s Political Affairs Committee.

Concerns Over South Korea’s Competitive Edge in Stablecoin Regulations

Industry groups have expressed concerns that further delays in stablecoin regulations could leave South Korea lagging behind countries like the United States, European Union, and Japan, all of which have already implemented stablecoin regulations.

Currently, the issuance of domestic stablecoins is illegal in South Korea, even though companies are laying the groundwork for necessary infrastructure. For instance, Naver Financial has developed a blockchain wallet for Busan’s local currency program, and KakaoBank has commenced work on a KRW-denominated digital token. Additionally, major banks are exploring a collaborative stablecoin project targeting late 2025 or early 2026.

The urgency for regulatory action has increased following recent enforcement challenges. In December, it was revealed that Binance froze only a fraction of the funds stolen during a hack at Upbit, despite urgent requests for assistance from the police and the exchange. Investigators noted that hackers quickly laundered assets across various chains and wallets, underscoring the difficulties in coordinating responses without a clear oversight framework.

Experts have emphasized that incidents like these highlight the pressing need for more effective regulatory controls as the activity within the digital asset space continues to grow.

South Korea’s discussions on stablecoins are also situated within a broader context of delayed cryptocurrency policies. The country's virtual asset tax regime, which was approved in 2020, has faced multiple postponements and is now scheduled for 2027.