Korea Should Adopt Risk-Based Stablecoin Rules Instead of Blanket Regulation

Uk Jin

Summary

Speakers said differentiated regulation that reflects the risk level of each digital asset would be appropriate for bringing stablecoins into the formal financial system.
They said the EU’s strict, one-size-fits-all MiCA rules led some companies and liquidity to leave the market.
Kim said Korea should consider a risk-proportionate model like the U.K.’s, applying different rules based on each digital asset’s risk level.

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Joshua Townson, global head of regulatory affairs at DCGG, or Digital Currency Governance Group, and Kim Tae-rim, managing partner at AXIS Law, speak at the “Global Stablecoin Trends and Opportunities for Korea’s Digital Economy” seminar on May 12 at the National Assembly Members’ Office Building. Photo: Jin Wook, Bloomingbit

South Korea should adopt a differentiated regulatory framework for stablecoins based on the risk profile of each digital asset, rather than imposing uniform rules across the board, speakers at a seminar in Seoul said. They added that Korea should design a system suited to its own market by studying the results and side effects seen in major jurisdictions that have already rolled out digital-asset regulation.

Joshua Townson, global head of regulatory affairs at DCGG, or Digital Currency Governance Group, made the remarks at the “Global Stablecoin Trends and Opportunities for Korea’s Digital Economy” seminar held on May 12 at the National Assembly Members’ Office Building in Yeouido, Seoul. Major economies are accelerating efforts to build stablecoin regulatory frameworks, but results have diverged depending on the regulatory approach taken in each market, he said.

Townson said the European Union had produced disappointing results under the Markets in Crypto-Assets regulation, or MiCA, because of its overly stringent approach. MiCA applies strict, uniform rules to stablecoins. As a result, some companies and liquidity have left the market, he said.

As an example Korea could look to, Townson cited the U.K.’s digital-asset legislation. The U.K. has adopted an approach that varies regulatory intensity depending on risk levels and use cases, he said. Given Korea’s high level of digital-asset adoption, the country has an opportunity to build a world-class regulatory framework by learning from the strengths and weaknesses of overseas regimes.

Kim Tae-rim, managing partner at AXIS Law, said uniform regulation modeled on the EU’s MiCA framework could encourage regulatory arbitrage and drive participants out of the market. Korea should use a risk-proportionate model similar to the U.K.’s as a reference for its own regulatory system, applying different rules according to the risk level of each digital asset, he said.

He added that major countries are moving toward bringing markets into the regulatory system through safeguards rather than blocking them outright. Korea should also focus on building a structure that allows the market to be managed within the institutional framework rather than trying to hold back its development, he said.