South Korea Delays Crypto Regulation as Stablecoin Rules Face Deadlock

South Korea’s next major step toward comprehensive crypto regulation has been pushed into 2026, after regulators hit a deadlock over who should be allowed to issue stablecoins. While the government broadly agrees on stricter investor protections and higher compliance standards, disagreements over stablecoin issuance have stalled legislative progress.

Key Takeaways:

• The Financial Services Commission (FSC) is drafting a Digital Asset Basic Act, aimed at raising compliance across the crypto sector. This includes stricter disclosure rules, advertising restrictions, customer protection measures, and liability standards for firms in cases of hacks or system outages, even if negligence isn’t proven.
• Proposed stablecoin rules would require issuers to hold 100% of reserves in bank deposits or government bonds and place them under licensed third-party custody. The goal is to insulate investors from losses if an issuer collapses and prevent systemic spillover risks similar to past market failures.
• The Bank of Korea has advocated for stablecoins to be issued only by bank-led consortia, with banks holding at least 51% ownership. Their argument centers on maintaining monetary stability and reducing systemic risks.
• The FSC opposes fixed ownership thresholds, warning that limiting issuance to banks could exclude technology firms and slow innovation in digital finance and payments.
• Beyond stablecoins, the draft law could allow domestic ICOs again, for projects that meet strict disclosure and risk management standards, a notable shift from the 2017 ban.

The delay highlights the tension between protecting investors and fostering innovation. Stablecoin regulation remains the central point of contention, and the outcome will likely shape how crypto evolves in South Korea over the next few years.

This raises interesting questions for the crypto community: Will strict bank led stablecoin models stifle innovation? Or are tighter safeguards necessary to prevent another market collapse?