South Korea considers new rules giving banks control of stablecoins

South Korea has moved closer to introducing bank-led rules for Korean won stablecoins, with a new digital asset bill expected this month as financial institutions and fintech companies compete for roles in issuing and distributing the tokens.

Summary

• South Korea's proposed digital asset legislation could require bank-majority consortiums to issue won-denominated stablecoins domestically.
• Financial regulators are preparing legislation covering stablecoin issuance, distribution, payment services and consumer protection requirements.
• VIDEX CEO Ryu Hong-ryeol urged lawmakers to permit qualified fintech firms to issue won stablecoins.
• South Korea's competition regulator is reviewing the planned merger between Upbit operator Dunamu and Naver Financial.
• Banks and payment providers are testing stablecoin infrastructure while awaiting final rules governing commercial issuance.

South Korean outlet ZDNet Korea reported on November 12 that lawmakers remain divided over a proposal requiring banks to hold a majority stake in stablecoin-issuing consortiums. Cryptocurrency exchanges and payment companies could participate in distribution, customer transactions and merchant settlement services.

The proposal comes as lawmakers prepare to examine the country's second-stage cryptocurrency legislation, while industry representatives continue to disagree over whether stablecoin issuance should remain largely under bank control.

South Korea considers bank-led stablecoin issuance

Under the proposed framework, banks would hold at least 50% plus one share in consortiums authorized to issue won-denominated stablecoins.

The arrangement would place financial institutions in charge of issuance while allowing cryptocurrency exchanges and technology companies to provide services connecting the tokens with consumers and businesses.

The Financial Services Commission is expected to present the main provisions of the Digital Asset Basic Act during November, following consultations with other government agencies.

South Korea's legislation has faced delays because regulators and lawmakers have disagreed over issuer eligibility, ownership restrictions on cryptocurrency exchanges and consumer protection requirements.

Fintech companies oppose restrictions on stablecoin issuers

The possible limits have drawn criticism from financial technology companies, which argue that licensing requirements should focus on financial safeguards and operational capabilities.

Speaking at a November 12 National Assembly forum on building trustworthy infrastructure for won stablecoins, VIDEX CEO Ryu Hong-ryeol urged lawmakers to avoid restricting issuance to banks.

"Licensing standards should be established based on business capabilities and risk management systems rather than limiting issuers to banks," Ryu said.

He argued that a bank-centered framework could prevent technology companies from fully using their expertise in blockchain infrastructure and payment processing.

Instead, Ryu proposed evaluating applicants based on their ability to manage reserve assets, control token issuance and redemption, and undergo independent verification.

He suggested that banks could manage reserves and liquidity requirements while technology companies handle blockchain operations, private keys and payment services.

"Financial institutions and technology companies are in a mutually complementary relationship, not a replacement," Ryu said.

Participants at the forum discussed additional requirements covering wallet custody, key management, multisignature security and auditing.

Legal experts called for clearer rules governing stablecoin payments, settlement services and transactions involving public and private blockchains.

Upbit and Naver Financial prepare for stablecoin payments

The proposed framework could affect the planned business combination between Dunamu, which operates Upbit, and Naver Financial.

Under their agreement, Naver Financial would acquire Dunamu through a share exchange, combining a major digital asset trading platform with an established online payments business.

Dunamu could provide cryptocurrency trading and stablecoin distribution services, while Naver Financial could handle merchant payments and settlements.

The companies have not received final regulatory approval for their proposed merger.

On November 10, South Korea's Fair Trade Commission began formal deliberations after examining potential competition restrictions involving the two businesses.

The regulator identified 10 affected markets, including cryptocurrency exchanges, online payments and the future won stablecoin market.

Its review specifically considered whether linking stablecoin issuance, trading and merchant payments could make it harder for competing businesses to attract customers.

The companies submitted proposed corrective measures, which the commission will consider before making its final decision.

Meanwhile, South Korean banks and fintech companies have continued testing stablecoin payment infrastructure ahead of the legislation.

In October, Gwangju Bank and Toss completed a QR payment trial that connected banking applications with merchant payment terminals.

Lawmakers examine stablecoin payment and reserve safeguards

Beyond deciding who may issue won stablecoins, lawmakers are considering requirements for protecting customer funds and handling merchant settlements.

A financial regulatory representative said stablecoin services used for electronic payments may need to comply with South Korea's Electronic Financial Transactions Act.

The applicable requirements could cover customer funds held for payments, settlement balances, transaction records and dispute resolution procedures.

Separate discussions have examined whether payment service providers should maintain dedicated safeguards for assets received from customers before completing transactions.

The country's banks have already begun preparing for potential stablecoin services through partnerships with technology companies.

In September, Kakao Pay and KakaoBank signed a stablecoin agreement with Fireblocks to examine digital asset infrastructure and test distribution arrangements.