South Korea Proposes Strict Regulatory Framework for Stablecoins and Tokenized Assets

South Korea is moving toward a more structured regulatory environment for digital assets, with a new draft proposal from the ruling Democratic Party targeting stablecoins and tokenized real-world assets (RWAs). The proposed Digital Asset Basic Act would bring these instruments under existing financial oversight, specifically the Foreign Exchange Transactions Act and the Capital Markets Act, to mitigate risks associated with cross-border capital movement and asset custody. Under the draft, stablecoins used for international payments would be classified as "means of payment," subjecting related businesses to oversight even without separate registration. Furthermore, issuers of tokenized RWAs would be required to place underlying assets in managed trusts to ensure security and transparency, tying token issuance to existing custody frameworks. A notable provision in the draft bars the payment of interest to stablecoin holders, regardless of how the incentive is labeled. However, the bill may offer exemptions from foreign exchange reporting for certain stablecoin payments for goods and services within a defined scope. The move follows warnings from Bank of Korea Governor Lee Chang-yong regarding the potential for won-denominated stablecoins to disrupt foreign exchange stability and complicate capital-flow management. While the bill addresses custody and payment classification, it currently omits contentious issues such as bank-related requirements and exchange ownership limits, reflecting ongoing disagreements over the final scope of the legislation.