South Korea Advances Digital Asset Framework

South Korea has outlined the core structure of its proposed Digital Asset Framework Act, a second-phase legislative initiative intended to bring digital assets fully into the country’s regulatory system. The draft bill would replace the term “virtual assets” with “digital assets,” permit domestic initial coin offerings (ICO) under formal supervision, and significantly expand the legal responsibilities of digital asset exchanges.

Under the proposal, issuers and related parties would face strengthened liability for false statements or material omissions in white papers, while exchanges would be required to compensate users for losses caused by hacking incidents or system failures, absent user intent or gross negligence. These provisions signal a clear shift toward stronger investor protection and higher compliance expectations for market participants.

The bill also introduces new regulatory requirements for foreign-issued stablecoins, including mandatory establishment of a local presence in Korea and full reserve backing held with regulated custodians. However, key issues—such as stablecoin issuance eligibility and the proposed majority bank ownership rule—remain unresolved due to ongoing differences between the Financial Services Commission and the Bank of Korea.

Industry experts caution that resolving every issue at the statutory level may slow implementation. Instead, they emphasize the importance of enforcement decrees and regulatory sandbox programs to provide flexibility and maintain regulatory momentum as global stablecoin usage and asset tokenization accelerate.

Read More: South Korea Sets First Security Standards for Digital Wallets