South Korea -- Stablecoin Regulations Regulatory Overview

South Korea lacks a fully enacted dedicated regulatory framework for stablecoins as of mid-2025, with stablecoins currently falling under the general "virtual asset" definition; however, proposed legislation including the Digital Asset Basic Act and amendments to the Foreign Exchange Transactions Act aim to classify them as foreign exchange payment mechanisms (not explicitly as e-money, payment tokens, or securities).[1][5][6]

Classification

• Stablecoins are proposed to be treated as foreign exchange payment vehicles, subjecting cross-border transactions to oversight by foreign exchange authorities without new licensing categories.[1][6]
• This integrates them into existing financial regulations rather than classifying them as securities or e-money; tokenized real-world assets (RWAs) linked to stablecoins require trust custody under the Capital Markets Act.[1][6]
• Domestic small-scale payments (e.g., for goods/services) may be exempt from foreign exchange reporting.[1][6]

Reserve Requirements

• Issuers must maintain full or over-collateralized reserves, stored in regulated financial institutions, mirroring bank-style rules.[2]
• For KRW-pegged stablecoins, requirements cover collateral management and internal controls; major banks are developing a KRW stablecoin with launch targeted for late 2025/early 2026.[3]

Issuer Licensing

• No separate licensing yet; proposals require strict licensing and compliance akin to banks, with operations under FSC oversight, but bank-related issuer requirements remain unresolved.[2][6]
• Part of the Virtual Asset User Protection Act (phase 2), with a government bill planned for National Assembly submission around October 2025.[3]

Redemption Rights

• Not explicitly detailed in proposals; focus is on reserves ensuring 1:1 redeemability, with prohibitions preventing investment-like features.[1][2]

Algorithmic Stablecoin Rules

• No specific rules mentioned; all stablecoins (including potentially algorithmic) fall under general reserve and foreign exchange oversight, with a nationwide ban on interest-bearing or yield-generating stablecoins to position them solely as transaction mediums.[1][4][6]

CBDC Interaction

• No direct rules specified; however, the Bank of Korea governor has warned that KRW stablecoins could impact capital flows and foreign exchange stability, potentially competing with CBDC efforts.[6]
• Technical interoperability standards by the Financial Services Commission (FSC) would apply across blockchains, possibly facilitating CBDC integration.[1][4][6]

Proposals emphasize harmonization with traditional finance, prohibiting interest to avoid speculation, and enhancing monitoring for international flows; the framework is still evolving, with the Digital Asset Basic Act delayed past its 2025 target.[2][3][6] For latest developments, monitor FSC announcements, as no final laws are public.[5][7]