South Korea to Unveil Digital Asset Basic Act Draft This Month; Grace Period Favored for Exchange Ownership Cap

South Korea is set to unveil the government’s draft Digital Asset Basic Act this month. Officials are also giving greater weight to a grace period for rules that would cap major shareholders’ stakes in cryptocurrency exchanges.

According to government ministries and other officials on Nov. 8, the Financial Services Commission has begun final coordination with related agencies ahead of releasing the draft. The FSC is moving forward with the legislation with the goal of introducing the basic law within this month.

A cap on major shareholders’ stakes in exchanges, one of the bill’s main issues, is likely to remain. The government draft is poised to set the limit at 15% to 20%, in line with the standard for alternative trading systems under the Capital Markets Act, to address concerns that profits or control could become overly concentrated among a small number of founders or shareholders.

At the same time, officials favor a grace period before the rule is fully implemented. One option under review would give major shareholders two years to reduce their holdings, with no separate penalty if they do so within that period.

Issuers of won-denominated stablecoins are expected to be limited to bank-led consortiums. The Bank of Korea has consistently argued that stablecoin issuers should be restricted to consortiums centered on banks.

Still, some members of the ruling Democratic Party say fintech firms and other innovative companies should also be allowed to participate to improve scalability. The government draft could still be revised during deliberations in the National Assembly.