- The Democratic Party of Korea and the People Power Party have proposed competing stablecoin bills in South Korea’s National Assembly.
- The bills diverge on areas including interest-bearing stablecoins.
- DPK lawmaker Min Byeong-deok warned that “we are fighting over who will run a small boat in the face of a tsunami.”
Stablecoin policy has emerged as a looming policy battle for South Korean lawmakers after the ruling and opposition parties proposed competing bills in the National Assembly.
Democratic Party of Korea (DPK) Representative Min Byeong-deok, who is behind South Korea’s Digital Basic Act, warned against turning stablecoin regulation into a political battleground. “Stablecoins are surging like a tsunami,” he said, “but we are fighting over who will run a small boat in the face of a tsunami.”
DPK and PPP Offer Competing Visions for Stablecoin Regulation
On Monday, July 28, members of the ruling DPK proposed the Act on the Issuance and Distribution of Stable-Value Digital Assets.
Meanwhile, members of the opposition People Power Party proposed the Act on Payment Innovation Using Value-Pegged Digital Assets.
Both bills would require stablecoin issuers to be regulated and licensed by the Financial Services Commission (FSC).
However, they diverge in some key areas.
One major difference is that the DPK bill explicitly bans interest-bearing coins while the PPP bill doesn’t.
Other differences relate to consumer protections, minimum redemption times, and the treatment of non-KRW stablecoins.
Central Bank Favors Bank-Issued Stablecoins
Although they disagree on specifics, both parties have proposed a regulatory framework that allows technology companies to issue digital won.
In contrast, Bank of Korea governor Rhee Chang-yong has said only banks should be able to issue stablecoins.
Following the introduction of South Korea’s Digital Basic Act, eight of the country’s largest banks formed a joint venture to develop a KRW-pegged stablecoin.
“If we allow non-banks to issue stablecoins, this will cause big chaos,” Rhee Chang-yong warned earlier this month.
The central banker compared such a scenario to the era of “free banking” in the U.S. between 1837 and 1864.
During this period, any bank could print its own paper notes. This led to notes depreciating in value as they traveled across the country away from their issuing banks, and the system ultimately collapsed following a string of bank failures.
Promoting Won Stablecoins
South Korea’s recent push for stablecoin regulation reflects concerns about the growing influence of dollar-pegged stablecoins like USDT and USDST.
Whether issued by commercial banks or financial technology companies, won-pegged stablecoins are posited as a means of preventing capital outflow and securing a role for the won in highly digital sectors like crypto trading.
Finalizing some form of stablecoin regulation “is our last chance to take some portion of the market even if we can’t outsmart dollar stablecoins as a settlement tool,” said Min Byeong-deok.
“Speed is the key,” he emphasized.
