Korea watchdog advances sweeping Digital Asset law

TLDR

South Koreas top financial regulator is pushing forward a comprehensive Digital Asset Basic Act that would overhaul how local crypto exchanges and stablecoins are supervised.

1. The Financial Services Commission (FSC) is moving a wide ranging Digital Asset Basic Act toward finalization, building on earlier user protection rules and recent Bithumb related oversight failures.
2. The draft framework would treat exchanges more like banks, with bank led ownership structures, shareholder caps, strict liability for losses, and mandatory audits that could force weaker platforms to exit.
3. Lawmakers still need to finalize and pass the bill, and key open questions on stablecoin issuers and tax rules will shape how friendly Korea is for both retail traders and institutions.

Deep Dive

1. What The FSC Is Advancing

Reports describe the FSC working with major exchanges in 2025 to finalize the Digital Asset Basic Act framework, billed as Koreas most significant crypto law since 2021.

The Act follows the 2024 Virtual Asset User Protection Act and was accelerated by a high profile Bithumb incident where internal control failures led to a massive mistaken Bitcoin credit, triggering political pressure for tighter oversight.

Separately, officials have reconfirmed a linked shareholder cap plan, with the Digital Asset Basic Act set for parliamentary review in early 2026.

2. How The Rules Reshape Exchanges

Under the draft, exchanges would be required to partner with bank led consortiums where traditional banks hold at least 50 percent plus one share, and major shareholders in exchanges face caps around 10 to 20 percent to curb concentrated control.

Exchanges would need stronger internal controls, quarterly external audits of virtual asset holdings, mandatory insurance or reserve funds, and strict liability for user losses regardless of fault, raising compliance costs but tightening investor protection.

Regulators expect these requirements to cut the number of domestic exchanges significantly, favoring well capitalized players that can meet bank tier governance and capital standards.

3. Stablecoins, Taxes And What To Watch

In parallel, the Bank of Korea is lobbying for a bank first model for won stablecoins, arguing that only licensed banks should initially issue KRW pegged tokens, according to recent stablecoin debate coverage.

Tax authorities are also studying a capital gains regime for virtual assets, targeted for 2027, which would sit on top of the new licensing framework and influence how attractive Korean venues are for active traders and long term holders.

Key milestones now are the National Assemblys treatment of the Digital Asset Basic Act, decisions on how strict the exchange ownership caps and bank requirements will be, and whether lawmakers soften the bank only stance on stablecoins.

Conclusion

Koreas regulators are converging on a bank like model for exchanges and stablecoins that prioritizes investor protection, governance, and monetary control over lightly supervised innovation.

If enacted as described, the Digital Asset Basic Act could shrink the number of local platforms but make the survivors more institution friendly, while tougher rules on stablecoins and future tax changes will determine how competitive Korea remains as a crypto trading hub.

Confidence: high, because multiple regulatory and policy reports point to the same bank centric direction and timing.