SOUTH KOREA Trends and Developments Contributed by: Wooyoung Choi, Suhhee Han, Seonghwan Ju and Matt Younghoon Mok, Lee & Ko
Systematisation of entry requirements Entry requirements for digital asset service provid - ers are expected to bifurcate from the current unified reporting-based system into authorisation and regis - tration. Digital asset business types are contemplat - ed to include trading, exchange, brokerage, custody and management, payment and transfer, discretion - ary management, advisory, order transmission and agency services. Recently, the authorities have been shifting towards permitting market-making for digital assets. Considering the direction of the proposed leg - islation, it appears likely that only operators author - ised or registered under the Act will be permitted to engage in market-making. Authorisation from the Financial Services Commission (FSC) would be required for trading, exchange, bro - kerage, and custody and management businesses. Anticipated requirements include minimum equity capital of KRW1 billion (approximately USD700,000), adequate personnel and IT infrastructure, security standards sufficient to maintain the safety of non- face-to-face transactions, and conflict of interest prevention systems. Registration with the FSC would be required for pay - ment and transfer of stablecoins, discretionary man - agement, advisory, order transmission and agency services. Anticipated requirements include minimum equity capital of KRW100–500 million (approximately USD70,000–350,000), adequate personnel, IT infra - structure and conflict of interest prevention systems. Institutionalisation of stablecoins There is intense debate regarding whether banks must hold 50% plus one share of the stablecoin issuing entity (the “51% rule”). Proponents argue that issuers should be structured as consortiums in which banks hold a majority stake to ensure financial stability and holder protection. Opponents contend that such a bank-dominated structure would impede fintech innovation, and that regulatory focus should instead be placed on reserve asset safety and transparency. Current discussions appear to be converging towards a consortium structure in which banks hold 50% plus one share. However, given the Banking Act’s 15% ownership limit per bank, at least four banks would be needed to form a single consortium. The Bank of
Korea has indicated that banks need not be the sin - gle largest shareholder provided that their aggregate shareholding exceeds 51%. Stringent regulations on stablecoin issuers are also expected. Entry would require FSC authorisation, with anticipated requirements including minimum equity capital of KRW5 billion (approximately USD3.5 million), adequate personnel and IT infrastructure, and conflict of interest prevention systems. Issuers would be required to maintain reserve assets equal to or exceeding outstanding unredeemed stable - coins, comprising safe assets such as cash, demand deposits and government bonds. Reserve assets would have to be segregated from the issuer’s pro - prietary assets and held through deposit with or trust to financial institutions. Issuers would be obliged to redeem stablecoins upon user request and to disclose monthly audit reports on reserve assets. Notably, overseas operators seeking to offer sta - blecoins in Korea or to Korean residents would be required to be subject to adequate supervision by their home country authority, establish a domestic branch or business office and register with the FSC. Reserve assets would have to be held with financial institutions in a manner prescribed by the Korean authorities. Where reserve assets are entrusted to overseas custodians, such custodians would have to maintain credit ratings above a prescribed level and have branches in Korea subject to FSC supervision. Implications Korea’s digital asset regulatory environment is tran - sitioning from regulatory gaps to institutionalisation. Once the Digital Asset Basic Act is passed, the Korean market is expected to become more predictable with reduced regulatory uncertainty, albeit with higher entry barriers. Entities planning market entry should deter - mine whether their business requires authorisation or registration, assess stablecoin governance require - ments including the 51% rule, and prepare systems to comply with transparency and disclosure obligations. STO legislation Overview Amendments to the Act on Electronic Registration of Stocks, Bonds, Etc. (the “Electronic Securities Act”)
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