South Korea's Digital Assets Act: A Crucial Step Toward Unified Crypto Regulation

SEOUL, South Korea – March 2025 – The Democratic Party of Korea’s Digital Asset Task Force (TF) is finalizing a comprehensive basic act on digital assets, a pivotal legislative move that aims to consolidate South Korea’s fragmented cryptocurrency regulations. This development, first reported exclusively by Digital Asset, represents the second-phase effort by the ruling party’s specialized group to create a unified legal framework for the nation’s vibrant crypto sector. Consequently, the task force plans to merge five separate bills from its member lawmakers into a single proposal for submission this week, marking a significant step in the country’s regulatory journey. However, the path forward is not without potential obstacles, as a key debate over exchange ownership limits highlights the complex balance between market oversight and industry growth.

The Genesis of South Korea’s Digital Assets Basic Act

South Korea’s journey toward formal digital asset regulation has been both deliberate and complex. Following the explosive growth of cryptocurrency trading and several high-profile incidents, lawmakers recognized the urgent need for a clear legal structure. The Democratic Party of Korea established its Digital Asset Task Force specifically to address this regulatory vacuum. This group comprises lawmakers with expertise in finance, technology, and law. Their mandate is to draft legislation that protects investors while fostering innovation. The current effort to create a “basic act” follows earlier, more targeted regulatory measures. These included strict know-your-customer (KYC) and anti-money laundering (AML) rules for exchanges. The basic act aims to be a foundational law, similar to frameworks governing traditional financial markets. It seeks to provide legal certainty for businesses and consumers operating in the digital asset space. This legislative push aligns with global trends where major economies are establishing comprehensive crypto regulations.

Consolidating Legislation: From Five Bills to One

The task force’s immediate strategy involves a significant consolidation of legislative proposals. Currently, five separate bills from Democratic Party lawmakers are on the table. Each bill addresses different aspects of the digital asset ecosystem. For instance, one may focus on consumer protection, while another tackles exchange licensing. The task force’s role is to harmonize these proposals into a single, coherent basic act. This unified approach prevents regulatory overlap and confusion. Following internal party coordination, Policy Committee Chairwoman Han Jeong-ae is expected to sponsor the consolidated bill. Her sponsorship signals high-level party support for the legislation. The consolidation process itself demonstrates a methodical, consensus-driven approach to lawmaking. It involves reconciling different viewpoints within the ruling party. This step is crucial for ensuring the bill has strong backing before it enters the broader parliamentary process. The goal is to present a clear, workable law that can withstand scrutiny and implementation.

The Stakes for South Korea’s Crypto Industry

South Korea hosts one of the world’s most active retail cryptocurrency markets. Major exchanges like Upbit and Bithumb see substantial daily trading volumes. The absence of a comprehensive basic act has created operational uncertainties for these businesses. A clear legal framework reduces regulatory risk for domestic and international investors. It also provides guidelines for new financial products like security token offerings (STOs) and decentralized finance (DeFi) services. Experts argue that robust regulation can actually stimulate legitimate innovation. It does so by distinguishing between speculative assets and utility tokens with real-world applications. The basic act could position South Korea as a leader in Asia’s regulated digital asset space. This leadership is especially important as financial hubs like Singapore and Hong Kong advance their own crypto regulations. The legislation’s success could influence regional standards and attract blockchain talent and investment to South Korea.

The Ownership Limit Debate: A Major Legislative Hurdle

A critical point of contention threatens to complicate the legislative process. South Korea’s Financial Services Commission (FSC), the main financial regulator, is advocating for a specific ownership cap. The FSC proposes limiting major shareholders’ stakes in digital asset exchanges to a range between 15% and 20%. This limit mirrors existing regulations for Alternative Trading Systems (ATS) in traditional finance. The regulator’s rationale centers on market stability and consumer protection. By preventing excessive control by a single entity, the FSC aims to mitigate conflicts of interest and reduce systemic risk. This approach is consistent with the regulator’s conservative stance on financial market concentration. However, this proposal has met with significant resistance from both industry representatives and some members of the Digital Asset Task Force.

Opponents of the strict ownership limit present several counterarguments. Firstly, they contend that digital asset exchanges differ fundamentally from traditional ATS platforms. Crypto exchanges often require substantial capital investment in technology and security, which may necessitate concentrated ownership during growth phases. Secondly, industry advocates warn that such a low cap could deter domestic entrepreneurship. It might force founders to cede control prematurely or discourage new market entrants. Thirdly, they argue that other critical safeguards—like robust governance, transparent auditing, and strong cybersecurity protocols—are more effective than ownership limits alone. This debate encapsulates a classic regulatory dilemma: how to ensure market integrity without stifling the very innovation the law seeks to nurture.

Comparative Regulatory Approaches

Understanding South Korea’s position requires a look at global regulatory models. The table below contrasts key approaches to exchange governance.

Jurisdiction	Key Regulatory Focus	Ownership/Governance Rules
South Korea (Proposed)	Basic Act framework, consumer protection	FSC proposes 15-20% major shareholder cap (debated)
Japan	Exchange registration with FSA, strict custody rules	No specific ownership cap; focus on fit-and-proper tests for directors
Singapore	Licensing under Payment Services Act	Regulatory approval required for controllers (≥12% stake or influence)
European Union (MiCA)	Harmonized rules across member states	Emphasizes capital requirements and management body suitability, not ownership %
United States (State/Federal)	Fragmented; BitLicense (NY), federal money transmitter laws	Varies by state; often includes background checks for control persons

This comparative view shows that South Korea’s proposed ownership cap is relatively specific and stringent. Most other regimes prioritize the character and competence of controlling persons over a fixed numerical stake. The FSC’s stance may reflect lessons from past domestic financial scandals where concentrated ownership led to malpractice. Resolving this issue will require careful negotiation between the regulator, lawmakers, and the industry to find a proportionate solution.

The Legislative Roadmap and Potential Impact

The immediate next steps for the digital assets basic act are clearly defined. After the task force finalizes the draft, it will proceed to the party’s policy committee. Subsequently, the bill will enter the formal National Assembly process. This process involves committee reviews, public hearings, and potential amendments. The ruling party’s majority status increases the bill’s chances of passage, but opposition parties will also scrutinize its contents. Furthermore, coordination with relevant government agencies, chiefly the FSC and the Ministry of Economy and Finance, is essential. A successful law would likely establish:

A Legal Definition of Digital Assets: Clarifying what constitutes a virtual asset under the law.
Licensing Requirements for Service Providers: Creating a formal process for exchanges, wallet providers, and brokers.
Investor Protection Mechanisms: Mandating disclosures, segregation of customer funds, and dispute resolution procedures.
Market Supervision Powers: Granting authorities the ability to monitor for manipulation and unfair trading practices.
Rules for New Asset Classes: Providing a pathway for regulating security tokens and other digital investment instruments.

The impact of such a law would be far-reaching. For consumers, it promises greater safety and recourse. For businesses, it offers the clarity needed for long-term planning and investment. For the government, it provides the tools to manage systemic risk and illicit finance. The global crypto industry is closely watching South Korea’s progress, as its model could influence other jurisdictions in the Asia-Pacific region.

Conclusion

The finalization of South Korea’s digital assets basic act by the ruling party’s task force marks a critical juncture in the nation’s approach to cryptocurrency regulation. This legislative effort to unify disparate bills into a coherent framework addresses a long-standing need for clarity and security in one of the world’s most dynamic crypto markets. While the debate over exchange ownership limits between the Financial Services Commission and industry stakeholders presents a significant hurdle, it also reflects the serious, detailed consideration being given to crafting effective rules. The outcome of this process will not only shape the future of South Korea’s digital economy but also contribute to the evolving global standard for regulating this transformative asset class. The successful passage and implementation of this basic act could solidify South Korea’s position as a forward-looking, responsible hub for digital asset innovation.

FAQs

Q1: What is the Digital Asset Task Force (TF) in South Korea?
The Digital Asset Task Force is a specialized group within South Korea’s ruling Democratic Party. It comprises lawmakers focused on developing comprehensive legislation for the cryptocurrency and digital asset sector. Their current project is drafting a “basic act” to serve as the primary legal framework.

Q2: What is the main point of conflict in the new digital assets act?
The key conflict centers on a proposal from the Financial Services Commission (FSC) to limit major shareholders in crypto exchanges to 15-20% ownership. The task force and industry representatives oppose this strict cap, arguing it is unsuitable for the crypto business model and could hinder growth and innovation.

Q3: How does this basic act differ from previous South Korean crypto regulations?
Previous regulations, like strict real-name banking rules and anti-money laundering requirements, were specific measures. The basic act aims to be a foundational, overarching law that defines digital assets, sets licensing standards for service providers, and establishes comprehensive investor protection and market supervision rules—similar to laws governing traditional securities markets.

Q4: When could the digital assets basic act become law?
After the task force submits the unified bill to the party’s policy committee, it will enter the National Assembly’s legislative process. This involves committee reviews, debates, and potential amendments. Given the ruling party’s majority and the topic’s priority, passage could occur within the current parliamentary session, but the contentious ownership issue may extend the timeline.

Q5: Why is South Korea’s regulatory approach important globally?
South Korea is a major retail cryptocurrency market and a technological leader. Its regulatory model is closely watched by other Asian and global jurisdictions. A balanced, effective framework from South Korea could set a influential precedent for how to foster a secure and innovative digital asset ecosystem, impacting international standards and capital flows.

South Korea’s Digital Assets Act: A Crucial Step Toward Unified Crypto Regulation