South Korea Pushes Ahead with Stablecoin Legislation Under New President Lee Jae-myung

With one-third of the population engaged in crypto, the legislation aims to solidify South Korea’s role in the global crypto market

With one-third of the population engaged in crypto, the legislation aims to solidify South Korea’s role in the global crypto market

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Key takeaways 

  • South Korea’s new president is rapidly pushing forward legislation to legalize domestic stablecoins, fulfilling a major campaign promise.
  • The draft bill mandates companies applying for issuing stablecoins to have at least 500 million won in equity, secure Financial Services Commission approval, and maintain sufficient reserves for refunds.
  • The Bank of Korea opposes the legislation, citing concerns over monetary policy and asserting its constitutional authority over currency issuance.
  • With over $42 billion in stablecoin trading in Q1 and one-third of the population engaged in crypto, the legislation aims to solidify South Korea’s role in the global crypto market.
  • Market confidence surged after Lee’s inauguration, with KakaoPay shares jumping 45% and new projects like Kaia’s won-based stablecoin gaining momentum amid growing investor interest.

A New Bill to Allow Domestic Companies to Issue Stablecoins

South Korea is moving swiftly to legalize domestic stablecoins following the inauguration of President Lee Jae-myung, who campaigned on promises to advance cryptocurrency regulation. Legislative efforts led by his party are already underway, marking a significant shift in the country’s digital finance policy.

A new bill, introduced by lawmakers aligned with President Lee, proposes allowing domestic companies to issue stablecoins under strict regulatory conditions. Issuers would need at least 500 million won ($368,000) in equity capital, receive authorization from the Financial Services Commission, and maintain reserve assets to ensure investor protection and redemption capability.

However, the proposal faces constitutional scrutiny. The South Korean constitution reserves currency issuance rights for the Bank of Korea (BOK), raising questions about the legal standing of private-sector-issued won-pegged stablecoins.

Explosive Growth in Stablecoin Trading Spurs Action

Data from the Bank of Korea shows explosive growth in stablecoin activity, with US dollar-pegged stablecoin trades totaling 57 trillion won ($42 billion) on five major domestic exchanges in the first quarter of the year. The government’s move aims to tap into this momentum and further solidify South Korea’s status as a leading cryptocurrency market in Asia. Current estimates suggest that over 18 million South Koreans, roughly one-third of the country’s population, are engaged in crypto trading.

Fulfilling Campaign Promises

President Lee secured victory in a snap election on June 3 and has acted quickly to implement his pro-crypto platform. His broader digital asset agenda includes permitting the national pension fund to invest in cryptocurrencies and approving Bitcoin exchange-traded funds (ETFs).

We need a won-backed stablecoin market to prevent national wealth from leaking overseas,” Lee said during a May policy forum.

Regulatory Tensions Emerge with Central Bank

The Bank of Korea has voiced strong opposition to the initiative. Governor Rhee Chang-yong warned that stablecoins issued outside the central bank’s authority could undermine national monetary policy. The BOK insists on taking the lead in regulating any stablecoin tied to the Korean won.

Positive Market Reaction Signals Investor Confidence

Investor sentiment appears optimistic. KakaoPay, a major mobile payment platform, saw its shares jump 45% over five days, according to Google Finance. The bullish trend reflects growing confidence in the potential impact of stablecoin adoption.

Meanwhile, Kaia, a Layer-1 blockchain formed through a merger between Kakao’s Klaytn and LINE-backed Finschia, announced plans to launch a won-based stablecoin. Kakao’s deep integration across Korea’s digital services positions Kaia’s stablecoin initiative as a major development.

A Korea Chamber of Commerce and Industry survey revealed that nearly 60% of respondents plan to increase cryptocurrency investments under Lee’s leadership. Stock prices for fintech firms surged in response, with KakaoPay and competitor Danal both closing up 29.9% on Monday.

Legislative Framework Takes Shape

The appointment of Kim Yong-beom, former vice finance minister and recent head of research at blockchain venture capitalist Hashed, as Lee’s chief policy officer signals strong regulatory support.

Lawmaker Min’s upcoming Digital Asset Basic Act will reportedly include provisions for legalizing and overseeing won-pegged stablecoins, indicating growing legislative consensus behind the stablecoin framework.

Market analysts view KakaoPay as a primary beneficiary of domestic stablecoin adoption due to its extensive digital wallet infrastructure and QR code payment systems. The company serves as the fintech division of Kakao, whose Web3 subsidiary developed the Klaytn blockchain, now merged with Japanese messenger LINE-backed Finschia to create Kaia.

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