Financial Services Commission: "Granting the Bank of Korea and the Ministry of Economy and Finance the right to request emergency measures is excessive"…Differences expressed over three stablecoin bills

It has been confirmed that the Financial Services Commission conveyed to the National Assembly its opposition to proposals that would grant the Bank of Korea and the Ministry of Economy and Finance strong powers related to supervision of won-denominated stablecoins.

According to the review report of the National Assembly’s Standing Committee on Political Affairs on the stablecoin (value-stabilizing/value-pegged digital assets) bills by lawmakers Kim Eun-hye, An Do-geol, and Kim Hyun-jung, the FSC expressed opposition to granting strong powers to the Bank of Korea and the Ministry of Economy and Finance regarding supervision of won-denominated stablecoins.

The currently enforced Act on the Protection of Virtual Asset Users only grants the Bank of Korea the right to request submission of materials, but some lawmakers' bills add the Bank of Korea's right to demand inspections, the right to participate in joint inspections, and the Ministry of Economy and Finance/Bank of Korea's right to request orders for emergency measures. In response, the FSC pointed out, "Such allocation of powers is hard to find in overseas legislative examples and does not fit the FSC's structure." It judged that, since the Bank of Korea's deputy governor and the Ministry of Economy and Finance's vice minister already participate in the FSC's decision-making process, establishing a separate right to request would not have much practical benefit.

The FSC also stated that it would be excessive regulation to allow the Bank of Korea to exercise inspection rights even over stablecoins whose issuance scale is small and whose impact on monetary policy is limited. It warned that a plan to separately establish an interagency consultative body including the Bank of Korea and the Ministry of Economy and Finance under the FSC could conflict with the FSC's independence and its inherent decision-making authority. Differences in views among agencies like these are also affecting the delay of the second-phase virtual asset bill that the government said it would submit within the year.

On the definition of stablecoins, the FSC took the position that they should be limited to forms linked to a single fiat currency. Lawmaker Kim Eun-hye's bill allows linkage to various assets such as gold, U.S. Treasury bonds, and virtual assets, whereas the bills by An Do-geol and Kim Hyun-jung prohibit this, reflecting different approaches. The FSC suggested that multi-asset-based stablecoins are likely to be classified as securities under the Capital Markets Act and that it may be necessary to consider defining them in a form linked to the value of a single currency, like the EU MiCA's 'e-money tokens'.

Furthermore, regarding a provision that would have the Deposit Insurance Corporation provide liquidity support if a stablecoin issuer lacks redemption funds, the FSC said, "In major countries' cases, there is no basis found for deposit insurance institutions to directly support issuers," and that a cautious approach is necessary.