Desk Column: Korea Should Move Ahead With a Digital Asset Framework Law

Kang Hyun-woo, Deputy Political Editor

Legislation to establish a legal framework for digital assets in South Korea has stalled. Two years have passed since the country enacted only the Virtual Asset User Protection Act. Rules against unfair trading are in place, but there is still no basic framework defining what digital assets are or who can issue, distribute or use them for payments.

Meanwhile, Bitcoin has established itself as an investment asset with a market capitalization of $1.6 trillion, putting it on par with Google and Amazon. Dollar stablecoins are also being used in trade transactions, exposing cracks in governments' foreign-exchange control systems.

The U.S. financial market is already being reshaped by digital assets. BlackRock's BUIDL, a blockchain-based tokenized fund launched in 2024, has grown to $2.6 billion in assets under management.

Tokens Are Changing U.S. Finance

Tokenization means turning assets into digital certificates, or tokens, that are easier to trade online. Blockchain, or distributed ledger technology, records transaction histories in multiple blocks and links them together like a chain. Because countless computers around the world store the same ledger simultaneously, arbitrary changes and forgery are effectively impossible. Built on blockchain technology, tokens can carry the same legal effect as the underlying real-world assets.

BUIDL is issued and distributed as fund tokens backed by U.S. Treasuries and other assets held by BlackRock. When an investor buys $1 of BUIDL, that investor receives one fund token worth $1. If the fund generates returns by investing in Treasuries and other assets, investors receive profits in proportion to their holdings. Structurally, it is little different from a conventional fund.

Its trading convenience, however, is far greater than that of a traditional fund. It can use the standard securities settlement system, but it can also trade around the clock on crypto exchanges and be converted into cash immediately. Compared with stablecoins, it shares the same dollar peg but offers the added benefit of yield. Issuers of dollar stablecoins such as Tether and Circle are also increasing the share of BUIDL in their collateral assets instead of relying solely on U.S. Treasuries.

BlackRock is not alone in digitizing assets. JPMorgan, the largest U.S. investment bank, introduced a fund token called MONY late last year. It can be traded not only in dollars but also in USDC, a stablecoin. Apollo has launched a private-credit token, and HSBC has rolled out a deposit token.

Korea Lacks Even a Legal Definition

Could a fund token like BUIDL be issued in South Korea? For now, it cannot. A January revision to the Electronic Securities Act created part of the institutional foundation for tokenized securities. But it only gives tokenized securities the same legal effect as conventional securities. That means they are digital assets, or tokens, in form, but cannot be traded on crypto exchanges. In other words, they are different from BUIDL, which combines the strengths of both funds and digital assets. Banks and brokerages that loudly announced plans to enter securities tokenization are, in reality, still watching from the sidelines.

The solution is to enact a Digital Asset Basic Act that clearly defines what digital assets are and what can be done with them. The government and the ruling party reached a broad agreement in February, but legislation has been delayed since then for no clear reason. Disputes remain over limits on major shareholders' stakes and over who should be allowed to issue stablecoins. Even so, the law could set out a broad framework and leave details to a presidential decree later. Better to get started now than wait for a perfect law.

Kang Hyun-woo, Korea Economic Daily reporter, hkang@hankyung.com