Significant progress has been made toward creating a comprehensive regulatory framework for cryptocurrency in South Korea by the end of 2025. However, delays have arisen as a result of disputes between several major regulatory bodies over the rules surrounding the issuance of stablecoins pegged to the Korean won (KRW). These delays have ultimately postponed the implementation of the Digital Asset Basic Act (DABA), which was originally designed to provide legal certainty for the issuance and regulation of stablecoin. A finalizing of the DABA may not occur until 2026, as regulators continue to weigh their responsibility to provide an environment of financial stability against the need to promote technological innovation and foster a vibrant ecosystem of cryptocurrency development within one of Asia's leading markets for crypto.
One of the most active regions for cryptocurrency trading in the world today is in South Korea where exchanges such as Bithumb and Upbit have seen record high trading volumes over the years and are now major players in global crypto markets. Although there is considerable interest by South Koreans in trading cryptocurrencies, South Korea does not currently allow domestic stablecoin issuances so traders have to use foreign stablecoins such as USDC, USDT. President Lee Jae-myung, who took office as President of South Korea on January 10th, 2025 has expressed that creating and offering won-backed stablecoins should be a top priority for South Korea to protect its monetary sovereignty from U.S. dollar-dominated assets.
The DABA is part two of South Korea's regulatory framework for virtual assets. The first part of the framework, which was implemented prior to the DABA introduction, focused on preventing unfair trading practices from being conducted. Part two, as presented in the DABA, will now include developing clear guidelines for how digital asset operators can establish themselves as legitimate operators. Additionally, the guidelines will strengthen protections for investors and create a new set of criteria under which tokens can be issued.
The Financial Services Commission (FSC) worked with the Democratic Party to develop proposed legislation that would allow stablecoins pegged to the Korean lower KRW and their issuance under strict conditions:
Reserve Requirements - Issuers will be required to keep 100% (or more) of their reserves in "safe" assets such as government bonds and Bank Deposits.
Custody Rules - All of the reserve assets will be held by custodians such as banks to keep the Reserve Assets from being subject to bankruptcy risks caused by the Issuer.
Investor Protection - This legislation would also allow for no-fault liability for Issuers and establish new obligations for issuers to report on and segregate an Issuer's User Funds from the Issuer's own funds.
The new framework would allow for restarting the discussion and development of Initial Coin Offerings for Korean Residents, which were banned in 2017, as long as the ICO Projects are able to prove due diligence to meet the 'high bar' set by the new law.
The major barrier to implementing regulations related to the issuance of stablecoins is disagreement between the Bank of Korea (BOK) and the Financial Services Commission (FSC) regarding licensing authority for stablecoin issuance.
The BOK has called for tighter regulation of stablecoin issuance, stating that only consortiums that have a 51% or greater bank ownership should be able to issue stablecoins. This view focuses on financial stability and the use of banks' current compliance with solvency and anti-money laundering regulations to reduce systemic risk.
In opposition, FSC commissioners and legislators contend that if only banks are permitted to issue stablecoins, it may lead to a loss of innovation and a reduction in the number of fintech and technology companies participating in the market. They argue for a more open regulatory framework to foster competition and create network effects.
In addition to these two main issues, there are several additional unresolved issues including:
1. The establishment of a separate regulatory committee specifically to supervise the licensing of stablecoin issuers.
2. The need for capital reserve requirements; proposals range from 500 million to 25 billion won.
3. The extent of regulatory authority over the reserve assets backing issued stablecoins, as well as whether or not the issuance of interest-bearing stablecoins should be allowed.
These discussions have created a regulatory impasse that has resulted in the delay of bill submission to 2026. The ruling Democratic Party (the ruling political party) is now working on a unified alternative proposal that consolidates the various legislative initiatives, in an attempt to break the regulatory impasse and to create an actionable legislative framework.
For crypto companies, exchanges, and prospective stablecoin issuers in South Korea, the delay causes additional uncertainty surrounding the impending implementation of regulation. If there are no clear-cut guidelines for businesses in South Korea, they may wait on expanding or launching products until they know they will not face an impending regulatory barrier; thus transferring any future innovations to more highly regulated jurisdictions. At the same time, the continuous growth of foreign stablecoins raises concerns about the effects of stablecoins on monetary policy.
Nonetheless, private-sector initiatives—particularly banks examining the use of stablecoins pegged to the Korean won—appear to be progressing independently of regulations, which indicates ongoing interest in stablecoin technology despite the regulatory barriers.
Notably, Terraform Labs co-founder Do Kwon was sentenced to 15 years imprisonment in December 2025 in the United States for his involvement in the destruction of the Terra ecosystem that caused a loss of approximately $40–$50 Billion from the market in 2022. The South Korean national was extradited from Montenegro to the United States at the end of 2024 and pleaded guilty to fraudulent activity.
In South Korea, Kwon faces additional charges and could receive up to 40 years' imprisonment if convicted. Legal experts believe that it is possible Kwon could complete part of his U.S. sentence and then be transferred or extradited to South Korea for the additional charges. This case illustrates the increasing scrutiny of cryptocurrency projects on a global basis and has the potential to affect how regulators proceed with caution when evaluating cryptocurrencies or blockchain technology in South Korea.
Navigating tensions between its regulatory bodies, South Korea could achieve resolution over its cryptocurrency regulations by 2026 through possible tiered regulation schemes and/or pilot programs associated with stablecoin issuance. The results will greatly affect South Korea’s standing within a rapidly evolving global crypto ecosystem, strata of adequate protections balanced by growth opportunities.
It will be vitally important for both investors and stakeholders throughout the industry to watch for ongoing updates from these three important regulatory agencies (FSC, BOK, National Assembly). On the one hand, South Korea has a very healthy crypto marketplace that has not only continued to successfully weather the impact of the COVID pandemic, but on the other hand, effective regulation of that marketplace will be essential to allowing it to reach its full potential.
This article is a summary of information available as of December 2025 as reported in the most recent reports on the state of South Korea's cryptocurrency regulations and activities associated therewith.
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