Korea’s Digital Asset Act: The Stablecoin Battle Shaping Asia’s Crypto Rules

South Korea is attempting something no Asian economy has yet pulled off: building a unified digital asset law that simultaneously satisfies central bank stability concerns, fintech ambitions, and consumer protection demands. The result — the Digital Asset Basic Act — has become the most contentious piece of financial legislation in Seoul in years, stalled by a single question that every jurisdiction from Washington to Brussels is also wrestling with: who gets to issue stablecoins?

The answer South Korea lands on will not stay local. With won-denominated stablecoin purchases reaching approximately $64 billion over a twelve-month period according to Chainalysis data cited by Cointelegraph, and Project Hangang Phase 2 now testing deposit tokens across nine commercial banks, the country’s regulatory choices are becoming a live reference case for the rest of Asia.

From Virtual Assets to Digital Assets: What the Act Actually Changes

The Digital Asset Basic Act is not South Korea’s first attempt at crypto regulation. The Act on the Protection of Virtual Asset Users, effective since July 2024, already mandates customer fund segregation through banks, requires at least 80 percent of customer assets to be held in cold-wallet storage, and imposes criminal penalties for unfair trading practices. What it does not do is address token issuance, stablecoin governance, or real-world asset tokenization.

The new law fills those gaps. According to BanklessTimes, the act replaces the term “virtual assets” with “digital assets” across Korean financial law and introduces a unified rulebook covering coin issuance, trading, and consumer protection. Payment-focused stablecoins receive explicit license requirements, mandatory reserve backing, and redemption rights. Tokenized real-world assets — bonds, real estate, art — are folded into capital markets law with identical investor protection and disclosure standards as traditional securities.

Two provisions stand out. First, all stablecoin issuers must maintain reserves exceeding 100 percent of circulating supply, held in bank deposits or government securities and structurally separated from the issuer’s balance sheet, per BanklessTimes. Second, the act introduces no-fault liability, making operators responsible for user losses even without proven negligence — a consumer protection standard that goes further than most Western frameworks.

Foreign-issued stablecoins face a localization requirement: issuers such as Circle would need to establish a Korean branch or subsidiary before their tokens can be legally used in the country, according to BanklessTimes.

The 51 Percent Rule: Why the Act Stalled

The legislation was originally expected to pass by late 2025. It did not, and the reason is a single regulatory threshold that has become a proxy war between two visions of Korean finance.

The Bank of Korea argues that only bank-led consortiums holding at least 51 percent ownership should be permitted to issue won-backed stablecoins. The central bank frames this as a financial stability imperative: banks bring prudential discipline, capital standards, anti-money-laundering controls, and crisis management capacity that non-bank entities lack. The BOK has also warned that allowing non-bank corporate leadership of stablecoin issuers could violate Korea’s traditional separation between industrial and financial capital, per Cointelegraph’s analysis.

The Financial Services Commission sees it differently. The FSC has cited the European Union’s MiCA regulation, where 14 of 15 licensed stablecoin issuers are electronic money institutions rather than banks, according to Crowdfund Insider. The FSC has also pointed to Japan’s fintech-led yen stablecoin projects as evidence that innovation can coexist with regulatory boundaries, per Crowdfund Insider. The commission’s position is that ownership thresholds are indirect regulation when more direct tools — reserve requirements, audits, redemption rules, supervisory powers — already exist.

The ruling Democratic Party has sided with the FSC’s position, opposing the 51 percent rule. As of early 2026, the party finalized the Digital Asset Basic Act text and planned submission before the Lunar New Year holiday.

Three resolution scenarios are under active discussion, according to Cointelegraph: staged licensing where banks move first and broader participation follows (the BOK’s preferred path); open licensing with tiered requirements where larger issuers face heavier oversight; or optional bank consortia that are permitted but not mandated, effectively softening the 51 percent threshold into a voluntary structure.

The Stakes: Why This Is Not Just a Licensing Debate

The stablecoin issuer question matters because it determines the architecture of Korea’s future payment infrastructure. If banks control issuance, the deposit token model already being tested in Project Hangang becomes the default settlement layer — tightly integrated with existing banking rails, supervised by the BOK, and insulated from crypto-native volatility. If fintechs gain independent issuance rights, Korea opens the door to competitive stablecoin markets where speed, cost, and user experience drive adoption rather than regulatory incumbency.

The commercial implications are significant. Toss, one of Korea’s largest fintech platforms, is reportedly preparing to issue a won-based stablecoin as soon as the regulatory framework is finalized, per Cointelegraph. Banks including Hana, Shinhan, and Woori are simultaneously building compliant infrastructure. The minimum capital requirement of 5 billion won — roughly $3.5 million, per BanklessTimes — is low enough that multiple fintech entrants could qualify, which is precisely what the BOK considers destabilizing.

Meanwhile, Korean traders are not waiting. Major exchanges including Bithumb and Coinone added USDT/KRW trading pairs starting in December 2023, and dollar-pegged stablecoins remain the primary vehicle for accessing offshore liquidity, according to Cointelegraph. Every month the domestic framework remains unresolved, more activity migrates to dollar-denominated infrastructure outside Korean regulatory visibility.

Project Hangang Phase 2: The Central Bank’s Counter-Move

While legislators debate stablecoin governance, the Bank of Korea has been building facts on the ground. Project Hangang Phase 2 launched on March 18, 2026, expanding the digital won pilot from seven to nine commercial banks with the addition of Kyongnam Bank and iM Bank, according to CryptoNews.net.

The architecture is deliberately positioned between a full retail CBDC and private stablecoins. The BOK has described it as “an intermediate stage between a CBDC and stablecoins,” per CryptoNews.net — a wholesale central bank digital currency layer that underpins commercial bank deposit tokens. This framing is strategically important: it preserves the central bank’s role in settlement while delegating the customer-facing layer to commercial banks.

Phase 1 results provide a baseline. According to CryptoNews.net, the BOK invited 100,000 citizens to participate, approximately 80,000 opened wallets, the system recorded 118,000 test transactions, and total payment volume reached 692.46 million won over roughly three months beginning in April 2025. The seven Phase 1 banks collectively invested approximately 30 to 35 billion won in infrastructure development.

Phase 2 introduces two critical real-world use cases. The first involves government subsidy distribution using deposit tokens — notable given that South Korea’s total government subsidy flow amounts to 110 trillion won, per CryptoNews.net. The second enables nationwide consumer payments and peer-to-peer transfers with enhanced usability features: biometric authentication via fingerprint, automatic top-up from linked bank accounts, and direct P2P wallet transfers.

LG CNS serves as the core systems infrastructure provider, according to CryptoNews.net. On April 7, 2026, KB Financial signed an MOU with BOK Governor Changyong Rhee at the central bank’s headquarters, with KB Financial’s future strategy division head Lee Chang-kwon stating that “KB Financial will devote all of the group’s capabilities to ensuring that deposit tokens take root as an everyday payment method closely integrated into daily life,” per Seoul Economic Daily.

Large-scale transactions involving all nine banks are planned for the second half of 2026, with testing extending through September, according to ClearingPost. Perhaps most forward-looking, the BOK has indicated intentions to build infrastructure supporting “AI-based automatic payments,” per ClearingPost — designing the CBDC architecture for machine-initiated transactions.

Asia’s Regulatory Patchwork: Where Korea Fits

South Korea’s regulatory choices do not exist in isolation. Japan has long required that only licensed banks and trust firms issue stablecoins, recently expanding its Financial Instruments and Exchange Act to cover tokenized real estate. Singapore’s Monetary Authority has backed asset tokenization initiatives with structured licensing regimes for exchanges and stablecoin issuers. Hong Kong has adopted a two-track approach seeking to attract institutional capital while limiting retail risk.

The common thread across all four jurisdictions is a requirement for local presence. Japan, Hong Kong, and now Korea all mandate that foreign stablecoin issuers establish domestic entities or partnerships. The differences lie in who can issue domestically.

Japan’s bank-and-trust-firm-only model is the closest analog to the BOK’s 51 percent proposal. Singapore’s approach is more permissive, licensing non-bank payment institutions alongside traditional financial firms. The EU’s MiCA framework, which the FSC has explicitly cited as a counterexample, demonstrates that electronic money institutions — effectively regulated fintechs — can operate as the primary stablecoin issuers without systemic instability.

The absence of harmonized rules across East Asia means each jurisdiction is effectively running its own experiment. There is no regional stablecoin zone, no mutual recognition framework, and limited interoperability between national deposit token systems. Korea’s decision on the 51 percent rule will not just shape its domestic market — it will signal to the rest of the region whether the bank-first or fintech-inclusive model produces better outcomes.

The Deposit Token Gambit: Central Bank Strategy

Project Hangang reveals a deeper strategic calculation by the BOK. By advancing deposit token infrastructure before the stablecoin framework is finalized, the central bank is creating a fait accompli: a functioning, bank-mediated, centrally supervised digital payment system that could make independent stablecoin issuance seem redundant.

The logic is straightforward. If deposit tokens — backed by the wholesale CBDC layer, distributed by nine major banks, and integrated with government subsidy disbursement — become the default digital payment rail, the case for independent fintech-issued stablecoins weakens considerably. Why would merchants accept a fintech stablecoin when a bank-issued deposit token settles against central bank money?

But the BOK’s approach carries its own risks. Deposit tokens tied to the existing banking system inherit its cost structures, its operating hours, and its incentive misalignments. The credit card fee burden on small merchants — which Project Hangang explicitly aims to reduce, per ClearingPost — exists precisely because incumbents have limited motivation to lower prices absent competitive pressure. A bank-only stablecoin regime could replicate the same dynamic in digital form.

What Remains Unresolved

Several structural questions remain open as the Digital Asset Basic Act moves toward finalization.

Cross-border interoperability. Korea’s foreign stablecoin localization requirement creates a barrier for global issuers. Whether Circle, Tether, or other international stablecoin operators will invest in Korean subsidiaries depends on whether the domestic market justifies the compliance cost — and whether the regulatory framework is stable enough to plan around.

Deposit token scalability. Phase 1 processed 118,000 transactions over three months with 80,000 wallet holders, per CryptoNews.net. Scaling to nationwide adoption serving tens of millions of users requires orders-of-magnitude improvement in throughput, merchant integration, and user experience.

The competitive displacement timeline. Every month the domestic stablecoin framework remains unfinalized, dollar-denominated stablecoins entrench deeper into Korean trading flows. The $64 billion in annual won-denominated stablecoin activity, per Chainalysis data cited by Cointelegraph, reflects demand that will be met by offshore products if domestic options remain unavailable.

AI-native payment infrastructure. The BOK’s mention of AI-based automatic payments in the Hangang roadmap signals awareness that the next generation of digital payment demand may come from machine-to-machine transactions rather than human-initiated ones. Whether deposit tokens can serve as rails for autonomous agents is an open design question with significant implications.

Implications

South Korea’s Digital Asset Basic Act is attempting to accomplish in a single legislative package what the United States is spreading across multiple bills and what the EU achieved through the multi-year MiCA process. The ambition is notable; the execution risk is proportional.

The stablecoin issuer debate is ultimately a question about the future structure of Korean finance itself. A bank-first model preserves the existing order and the BOK’s transmission mechanism. A fintech-inclusive model risks disruption but may be necessary to prevent Korea’s digital payment infrastructure from being built on dollar-denominated rails outside its regulatory perimeter.

Project Hangang Phase 2 is the BOK’s strongest argument that the bank-mediated path can deliver innovation without the risks the central bank associates with independent stablecoin issuers. The next six months — as all nine banks scale to large-scale transactions and the legislature finalizes the 51 percent question — will determine whether that argument holds.

Key Takeaways

• The 51 percent rule is the fulcrum. The BOK’s insistence on majority bank ownership of stablecoin issuers versus the FSC’s fintech-inclusive alternative will define Korea’s digital asset market structure for years, per Cointelegraph’s analysis.

• Project Hangang is strategic positioning. By deploying deposit token infrastructure through nine banks before stablecoin rules are finalized, the BOK is creating competitive facts on the ground, per ClearingPost and CryptoNews.net.

• The consumer protection floor is high. No-fault liability and 100 percent reserve requirements set a standard that exceeds most Western frameworks, according to BanklessTimes.

• Dollar stablecoins are the real competitor. With $64 billion in annual won-denominated stablecoin activity already flowing through offshore infrastructure, per Chainalysis via Cointelegraph, regulatory delay benefits foreign issuers.

• Asia has no harmonized stablecoin framework. Japan, Singapore, Hong Kong, and Korea are each running independent experiments, making Korea’s choice a regional signal rather than a regional standard.