South Korea Crypto Law Delayed By Regulatory Deadlock

South Korea’s long-awaited Digital Asset Basic Act (DABA) has been delayed due to the disagreements among regulators over the issuance of stablecoins.

DABA is a sweeping framework that was proposed by the country’s ruling Democratic Party in June and is meant to govern crypto trading and issuance in one of Asia’s most active markets. 

According to a Korea Tech Desk article, the most significant disagreement among lawmakers has to do with who should have the legal authority to issue KRW-pegged stablecoins. 

That has resulted in a regulatory deadlock that is expected to delay the bill’s passage to some time in 2026.

Bank Of Korea Says Banks Should Be Permitted To Issue Stablecoins

The report said the Bank of Korea (BOK) argues that banks with majority (51%) ownership should be allowed to issue stablecoins. To support its argument, it added that financial institutions are already subject to stringent solvency and anti-money-laundering requirements. 

Therefore, it believes that those firms are the only ones in a position to ensure stability and to protect the overall financial system. 

South Korea’s Digital Asset Basic Act (DABA) passed June 2025: broad rules for tokenized assets—including stablecoins & NFTs—plus strict licensing, capital, audit, and disclosure standards. Oversight by Financial Services Commission. #RealWorldAssets #Tokenization #Blockchain…

— RWA Alert (@AboutRWAs) October 30, 2025

The Financial Services Commission (FSC), which is responsible for financial policy-making oversight, is more flexible.

While acknowledging the need for stability in the financial system, the FSC warned that a strict 51% rule could end up stifling innovation and competition in the market by blocking fintech firms with the technical knowledge and experience needed to build scalable infrastructure. 

The FSC then highlighted the European Union’s Markets in Crypto-Assets regulation in which most of the licensed stablecoin issuers are digital assets firms rather than traditional banks. It also mentioned Japan’s fintech-led yen stablecoin projects as an example of regulated innovation.

Ruling Party Also Rejects BOK’s 51% Rule

The FSC’s pushback against the BOK’s 51% rule follows a similar rejection from the ruling Democratic Party of Korea (DPK) last week. 

“A majority of participating experts voiced concerns about the BOK’s proposal, with many questioning whether such a framework could deliver innovation or generate strong network effects,” said DPK lawmaker Ahn Do-geol in a statement. 

“It is also hard to find global legislative precedents in which institutions from a specific sector are required to hold a 51%,” the lawmaker added. 

He went on to argue that the BOK’s stability concerns could be mitigated through regulatory and technological measures. 

South Korean Developer Behind One Of The Biggest Crypto Market Crashes

The focus on stability follows one of the biggest crypto crashes in the market’s history, which was triggered by the collapse of the Terra ecosystem.

South Korean software engineer Do Kwon developed the algorithmic stablecoin TerraUSD (UST) and its sister token Luna. The design of UST was intended to maintain a $1 peg through an automated relationship with Luna. 

However, the system failed catastrophically in May 2022, with UST losing its peg to the dollar and Luna’s price crashing to near zero. Combined, the TerraUSD-Luna collapse wiped out roughly $40-$45 billion in the market in just days. This triggered broader market losses and bankruptcies across the crypto space. 

TerraUSD price chart (Source: CoinMarketCap) 

Prosecutors alleged that Kwon and Terraform Labs made false and misleading claims about how the stablecoin system worked. Kwon was recently sentenced to 15 years in prison in the US for his role in the collapse. He could also face up to 40 years in prison in South Korea, according to a filing from his legal team. 

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