South Korea’s Ministry of Strategy and Finance announced on October 8 that it is considering measures to more strictly regulate stablecoins.
The decision comes amid mounting criticism that stablecoins are emerging as a hidden threat to foreign exchange markets due to insufficient government oversight.
Cross-border usage and growing criticism from the industry
According to local media reports, the ministry stressed that stablecoins are primarily used for transactions and exchanges in the virtual asset ecosystem and are playing an increasing role in cross-border transactions.
Officials believe these capabilities could soon be extended to major payment and transaction instruments in the real economy.
The Financial Services Commission (FSC) has also decided to prioritize stablecoins in the second legislative phase of the Virtual Asset User Protection Act (VAUPA). A spokesperson for the Financial Services Commission said, “We plan to hold discussions with relevant ministries and agencies, referring to legislative examples in Japan, the European Union, and other countries.”
The efforts come amid growing frustration among industry experts who say the country has been slow to respond to the increased use of stablecoins in trade transactions. Critics claim that the government is now beginning to review relevant laws due to concerns about gaps in macroeconomic policy management.
Stablecoins are gaining attention in global capital markets. Tether holds $97.6 billion worth of U.S. Treasuries, inching closer to South Korea’s $116.7 billion holdings, the world’s 18th largest.
In light of this, the government has been forced to apply foreign exchange regulations to transactions. A government official said:
“Regulation of stablecoins begins with the establishment of the Wompegcoin issuance system.”
Korean regulatory framework
Unlike South Korea, the EU and Japan have enacted regulations regarding stablecoins pegged to their national currencies through the Markets in Virtual Currency Act (MiCA).
The rules require at least 30% of customer deposits to be held externally to ensure stability, and require exchanges to record details of cross-border transactions. . Countries such as the United States, United Kingdom, and Australia are also moving towards such frameworks.
South Korea is developing a regulatory framework inspired by international practices. Key changes include relaxing rules prohibiting companies from holding virtual asset accounts and allowing stablecoin trading transactions to be included in official statistics.
Earlier this year, the country introduced VAUPA, which stipulates that crypto exchanges such as Upbit and Bithumb will pay supervisory fees based on operating profits from 2025.
The law also requires exchanges to keep at least 80% of user assets in cold storage to ensure that investments are risk-free. It also requires regular review of listed assets and delisting of assets that do not meet standards.
Special Offer (Sponsored) Binance Free $600 (CryptoPotato Exclusive): Receive an exclusive welcome offer of $600 on Binance when you register a new account using this link (more details).
Exclusive offer for 2024 on BYDFi Exchange: Welcome Reward up to $2,888. Register using this link and open a 100 USDT-M position for free!
