South Korea Pushes for Stablecoin Legalization:New President Lee Jae-myung Proposes the “Basic Digital Assets Act”

5 min readJun 13, 2025

#Korea #LeeJae-myung #crypto

One of the fastest campaign promise fulfillments ever — and no one saw it coming.

In June 2025, both South Korea’s political landscape and its crypto market underwent a bold transformation. Within a week of taking office, newly elected President Lee Jae-myung made headlines by swiftly delivering on his campaign promises: launching a comprehensive reform of South Korea’s cryptocurrency regulations, proposing a stablecoin legalization framework, and submitting the draft of the “Basic Digital Assets Act.”

This string of aggressive actions not only boosted morale among domestic blockchain companies but also reignited regional enthusiasm for crypto regulatory reform across Asia.

However, behind this policy pivot lies more than just “reform dividends.” It also brings regulatory power struggles, central bank resistance, public opinion divides, and volatile capital market reactions. This article dives deep into South Korea’s latest crypto legislation, unpacks its policy clauses, political motivations, and potential impact, and helps you understand just how “stable” this stablecoin play really is.

Lee Jae-myung Moves Fast: Crypto Legislation Becomes a Core National Agenda

According to Bloomberg, South Korea’s ruling Democratic Party officially submitted the draft of the Basic Digital Assets Act to the National Assembly in early June. It clearly proposes allowing local companies to issue KRW-based stablecoins, while outlining capital requirements and regulatory procedures. Core provisions of the draft include:

A minimum capital requirement of KRW 500 million (approx. USD 368,000) for stablecoin issuers;
Issuers must maintain appropriate reserves to ensure user redemption rights;
All stablecoin issuance must be approved by the Financial Services Commission (FSC);
The law encourages the development of localized crypto infrastructure, including wallets, exchanges, and on-chain financial systems.

From a policy standpoint, this is not just a green light for stablecoins — it’s a systematic unshackling of the local crypto finance ecosystem, aimed at incubating a domestic stablecoin market within a legal framework.

During a policy forum, Lee Jae-myung made a key statement:“We need to establish a stablecoin market backed by the Korean won to prevent national wealth from flowing overseas.”

This wasn’t just a policy direction — it was a direct response to the unchecked capital outflows and regulatory blind spots caused by millions of South Koreans investing in USD-denominated stablecoins like USDT and USDC over the past few years.

In-Depth Analysis of the Basic Digital Assets Act: Five Key Highlights

1. Capital Threshold: Setting the Bar for Stablecoin Entry

The law sets a KRW 500 million minimum capital requirement for stablecoin issuers, meaning not just anyone can enter the field. This mechanism is designed to filter out fly-by-night operations and pave the way for future market consolidation.

By imposing this threshold, the government is clearly trying to foster trusted, well-capitalized domestic stablecoin brands — a “Korean USDC” that both mitigates financial risk and preserves the won’s monetary sovereignty.

2. Reserve Requirements and Redemption Guarantee: Preventing a Terra-Like Collapse

The reform puts strong emphasis on reserve-backed models, a direct lesson from the catastrophic 2022 collapse of the Terra/LUNA algorithmic stablecoin, which wiped out millions of Korean investors and shattered public trust.

The new law mandates fully-backed, redeemable reserves — the polar opposite of Terra’s uncollateralized model. This reflects a “never again” stance from regulators, offering a two-layer safety net: asset backing + regulatory approval.

3. FSC Approval System: High Compliance Barriers, No More “Barefoot Projects”

Requiring all stablecoin projects to obtain approval from the FSC marks the formal arrival of a “licensing regime” for crypto in Korea — echoing recent regulatory shifts in Singapore. It signals a shift from reactive regulation to a pre-approval model.

As Korea’s top financial policymaking body, the FSC’s involvement shows that stablecoin policy has been elevated to the national strategic level. Future stablecoin issuers may face long approval processes, high regulatory standards, and bank-like compliance frameworks.This will increase market integrity but also raise entry barriers for startups.

4. Stablecoins for Local Payments and Settlements: Building a KRW-Pegged Crypto Economy

The draft law does not prohibit the use of stablecoins for daily payments or corporate settlements — interpreted by many as tacit encouragement.

The intent is clear: use KRW-backed stablecoins to build a compliant digital financial system. Instead of letting capital flow into USD-dominated stablecoin systems like Tether, the government hopes to retain domestic wealth by encouraging local users to transact and manage assets on-chain using stablecoins linked to the won.

5. Potential Integration with ETFs and Pension Funds: A Broader Policy Playbook

Lee Jae-myung’s crypto ambitions don’t stop at stablecoins. He has also voiced support for legalizing Bitcoin ETFs in Korea and even proposed that national pension funds invest in crypto assets.

This is a policy trifecta:

Stablecoin legalization as infrastructure
Bitcoin ETFs as investable products
Pension funds as long-term capital inflows

If all three go live, South Korea could become one of the first countries to establish a sovereign-endorsed, financially supported, and fully integrated crypto ecosystem.

Strong Market Reactions, But Pushback from the Central Bank

1. Bank of Korea Pushes Back: Stablecoins May Undermine Monetary Policy

Not everyone is excited about this “crypto revolution.”Bank of Korea Governor Rhee Chang-yong has openly opposed the proposal, warning that stablecoins issued by non-banks could weaken monetary policy independence and pose systemic financial risks.

And this concern isn’t without merit. If stablecoins gain significant traction, the central bank could lose control over KRW issuance, interest rate transmission, and capital flow oversight.

The Lee Jae-myung administration hasn’t ignored this issue. By strengthening reserve requirements and regulatory approval, they aim to prevent stablecoins from becoming a “parallel monetary system.”Still, balancing innovation and sovereignty is no easy task — and future policy conflicts seem inevitable.

2. Capital Markets Surge, But Analysts Remain Cautious

Following Lee’s policy announcements, Korea’s crypto-related stocks soared.Digital payments giant KakaoPay jumped 45% in five days, grabbing major market attention.

However, JPMorgan analysts Stanley Yang and Jihyun Cho remain cautious:“Unless Lee’s policies are rapidly implemented and deliver tangible results, this rally lacks fundamental support.”

In the short term, this surge reflects the market’s hunger for policy support.But in the longer run, investors will need to monitor:

Whether complementary legislation moves forward
How quickly the FSC can process applications
Whether tensions between the central bank and regulators escalate

Final Thoughts

President Lee Jae-myung is moving crypto from a “regulatory grey zone” into a national strategy — turning campaign slogans into law proposals, industry support, and capital mobilization.

Whether driven by voter demand, economic growth goals, or technological vision, his actions have put South Korea back on the front lines of global crypto policy-making.

But the real question is: Is Korea ready?

Does its institutional framework have the capacity to support a stablecoin market?Will power struggles between the central bank and the government spiral out of control?Have retail investors truly recovered from the trauma of the Terra collapse?

These are the very real challenges that will arise when the policies hit the ground.