South Korea’s next major crypto law is hitting a wall-and the problem isn’t technology, reserves, or compliance. It’s who gets to issue a won-backed stablecoin.
The proposed Digital Asset Basic Act has slowed dramatically as regulators argue over whether stablecoins should be treated like bank-issued money or as licensed digital financial products. With no compromise in sight, the legislation is now widely expected to slip into 2026, leaving Korea’s stablecoin future unresolved.
Banks VS Fintechs
At the center of the standoff is the Bank of Korea, which is pushing hard for a “banks-first” model. Under its preferred approach, won-backed stablecoins would be issued by bank-led consortia, with banks holding at least 51% ownership. The central bank argues that if stablecoins scale, they could influence monetary policy, capital flows, and financial stability, making bank control essential from day one.
On the other side, the Financial Services Commission and several lawmakers fear that a bank-dominated framework would limit competition and slow innovation. They argue that stablecoins can be regulated through licensing, disclosures, reserve rules, and enforcement-without structurally handing the market to banks.
This clash has frozen progress on the bill.
Why Won-Backed Stablecoins Matter so Much in Korea
Stablecoins already play a critical role in South Korea’s crypto market. Local traders frequently rely on dollar-pegged stablecoins to access offshore liquidity. If won-backed stablecoins grow at scale, they could significantly affect foreign exchange flows in a country with unusually high retail crypto participation.
That risk is why the central bank frames issuer eligibility as a financial stability decision, not just a market one. Officials argue that a cautious rollout-starting with banks-reduces the risk of sudden capital flight or loss of control over what effectively becomes private money.
Yet policymakers focused on competitiveness warn that if Korea fails to build a trusted domestic stablecoin, users will simply keep using foreign-issued tokens, reducing regulatory visibility and stunting local innovation.
A Regulatory Gap Between Phase One and Phase Two
South Korea’s first crypto law, the Act on the Protection of Virtual Asset Users, already governs exchanges and custodians. It mandates segregation of customer funds, cold-wallet storage, insurance or reserves for hacks, and criminal penalties for market abuse.
But that framework stops short of defining stablecoin issuance. The unresolved questions-issuer eligibility, supervision, and structure-were meant to be answered in the Digital Asset Basic Act. Instead, that’s where the process has stalled.
The Controversial ‘51% Rule’
The so-called “51% rule” would require banks to control a majority stake in any stablecoin issuer consortium. The Bank of Korea sees this as a way to import prudential discipline, AML controls, and crisis management into stablecoins before they become systemically important.
Critics counter that ownership thresholds are a blunt tool. They argue that risks can be addressed through reserve quality, audits, redemption guarantees, and supervisory powers—without hard-wiring bank dominance into the market. There’s also a uniquely Korean concern: allowing large non-bank corporates into finance could blur the country’s long-standing separation between industrial and financial capital.
Industry Pressure is Building
While regulators debate, companies are preparing. Major banks are gearing up for a bank-led model, while fintech and crypto-native firms want a more open regime. Toss, for example, has publicly said it plans to issue a won-backed stablecoin once the legal framework allows it.
Delays matter. The longer Korea hesitates, the more stablecoin usage defaults to offshore, dollar-based infrastructure, making it harder to reclaim the market later.
What to Watch Heading Into 2026
Several compromise paths are quietly being discussed. One option is staged licensing, where banks go first and broader participation follows later. Another is an open licensing system with stricter rules for issuers that become systemically large. A third possibility would allow bank-led consortia without making them mandatory, easing tensions around the 51% rule.
For now, South Korea’s stablecoin future remains stuck between financial caution and competitive ambition-and the clock is ticking.
