## South Korea's Stablecoin Regulations Stall Due to Bank and Fintech Company Conflicts

South Korea's efforts to establish a cryptocurrency law are facing unexpected delays due to serious disagreements among regulators over the issuance rights of won-linked stablecoins. This regulatory deadlock amplifies uncertainty for market participants in Asia's largest digital asset market and is likely to push the bill's passage beyond January.

### The Core of the Power Struggle: Conflicts Triggered by the 51% Rule

A major obstacle in the drafting process of the Digital Asset Basic Act (DABA) is the definition of stablecoin issuers. The Bank of Korea (BOK) advocates for limiting the issuance of won-linked stablecoins to banking institutions, requiring a majority (51%) stake ownership. Their argument is based on existing strict solvency requirements and anti-money laundering regulations, asserting that financial institutions are best suited to maintain currency stability and protect the financial system.

Meanwhile, the Financial Services Commission (FSC) strongly opposes this rigid framework. While recognizing the importance of safety, they warn that the 51% rule would significantly hinder competition and effectively exclude fintech companies with blockchain expertise from entering the market. Regulators are seeking alternative solutions through technical and regulatory measures to promote innovation while ensuring market openness.

### Global Cases Raise Questions

A representative example of the conflict among regulators can be seen in international markets. In the European Union, most licensed stablecoin issuers are digital asset companies, not limited to banks. In Japan, a yen-pegged stablecoin project led by fintech is being promoted within the regulatory framework, allowing non-financial entities to issue currency-linked assets.

These precedents suggest that it is theoretically possible to design a system that maintains financial stability while fostering innovation.

### Political Backlash and Search for Institutional Solutions

Ahn Do-geol, a member of the ruling Democratic Party (DPK), publicly criticized the BOK's 51% rule proposal, citing opposition from the expert community. Most participating experts expressed concerns about the proposal, questioning its ability to build strong network effects and foster innovation. The legislator stated, "It is also difficult to find international legislative precedents that require institutions in specific sectors to hold majority shares," implying that concerns over BOK's stability could be sufficiently mitigated through regulatory and technical measures.

### Barriers to Foreign-Issued Stablecoins

Another contentious issue within Korea's regulatory framework is the handling of foreign-issued stablecoins. The initial proposal from the FSC suggests that for stablecoins issued abroad to circulate legally in Korea, the issuer must obtain a license within Korea and establish a branch or subsidiary. This would impose substantial requirements on major players like Circle, the issuer of USDC, the second-largest stablecoin, effectively forcing them to build local infrastructure before entering the Korean market.

### Delayed Timeline and Outlook for Full Implementation

Due to the current conflicts among regulators, the passage of the Digital Asset Basic Act in the National Assembly is expected to be delayed until at least January, with full enforcement possibly not until 2026. This delay postpones a turning point in market liberalization after nine years of de facto bans on cryptocurrency trading in Korea. It is also noted that the regulatory easing initiated earlier this year stems from concerns over Korea's declining relative position in the global digital asset market.

This uncertain situation reflects a microcosm of the global debate over the management of fiat-backed stablecoins, and Korea's final regulatory design will significantly influence the competitive landscape, market innovation, and currency supervision functions.