South Korea plans to amend laws to regulate stablecoins! Regulation will be conducted in a manner similar to forex trading.

Stablecoins have become one of the cornerstones of the Crypto Assets market. Their value is pegged to fiat, which allows them to play a key role in value anchoring and capital hedging within the highly fluctuating world of digital assets. However, with increasing usage, stablecoins also face growing financial risks and regulatory pressures. In response, the South Korean government has decided to implement a new wave of regulatory actions: by amending the Forex Trading Act, stablecoins will be formally incorporated into the existing legal system for supervision and management.

Stablecoin will be regarded as a “means of payment”

According to the Korea Herald, Park Seong-hoon, a member of the ruling party People Power Party, is about to propose an amendment to the “Forex Trading Act” in the National Assembly. The core of the proposal is to legally redefine stablecoins as “means of payment”, giving them the same legal status as existing fiat currencies such as banknotes and coins.

The main points of this amendment include:

Legal determination: Stablecoins will be formally defined as “payment means” in Article 3, Section 1 of the Foreign Exchange Trading Act.

Regulation equivalence: Stablecoins will be subject to the same legal regulations as existing currencies in the future.

Plugging the loophole: The new legislation will fill the grey areas in the current laws regarding digital asset management.

Why is South Korea eager to regulate stablecoins?

South Korea's push for stablecoin regulation is not unfounded, but arises from dual concerns for financial security and consumer rights. As more and more users and institutions use stablecoins for cross-border transactions and capital transfers, the associated risks and regulatory gaps are becoming increasingly evident.

The four core motivations behind this legislation include:

Combat illegal activities: Prevent stablecoins from becoming tools for money laundering and underground finance;

Preventing tax evasion loopholes: By regulating, reduce the possibility of Crypto Assets becoming a channel for tax evasion.

Clarification of laws: Address the existing legal ambiguity regarding the definition of stablecoin;

Maintain financial stability: Incorporate stablecoins into the formal system to reduce systemic risk.

Will the new regulations change the market ecology?

Once this bill is passed, it will have a significant impact on both users and issuers of stablecoins. For general users, this means that the legality and security of transactions will be greatly enhanced; while for stablecoin issuers and encryption companies, they may face stricter compliance pressures and operational costs.

Potential Benefits:

Establishing Trust: Enhancing users' and institutions' confidence in stablecoins;

Consumer Protection: If there is a dispute in the transaction, there will be legal recourse.

Connecting with the financial system: Helps stablecoins operate within the formal financial system.

Potential Challenges:

Increased compliance costs: Operators need to invest resources to meet new regulations;

Innovation Limitation Risk: Overregulation may suppress the vitality of startups;

Market structure changes: Regulations may alter the market liquidity and competitive landscape of stablecoins.

Therefore, how to strike a balance between stability and innovation will be an important issue as regulatory policies advance in the future.

How does it differ from the regulatory approaches of the EU and the US?

It is worth noting that South Korea is not the only country regulating stablecoins. The European Union has passed the Markets in Crypto-Assets Regulation (MiCA), which includes detailed regulations on stablecoins; in the United States, several bills are also under discussion, proposing regulations for stablecoin issuers and related capital requirements.

Unlike the strategy of starting anew with legislation, South Korea has chosen to incorporate stablecoins into the existing framework of the Foreign Exchange Transaction Act, using current legal tools to address emerging asset issues, demonstrating a pragmatic and efficiency-oriented regulatory mindset.

This approach not only enhances the speed of regulation but also provides a reference paradigm for other countries, especially for those economies that already have a mature forex and financial regulatory framework.

This article discusses South Korea's plans to amend laws to regulate stablecoins! They will be subject to supervision similar to forex trading, first appeared in Chain News ABMedia.