The South Korean Digital Asset Basic Law is expected to include a no-fault compensation and stablecoin bankruptcy isolation mechanism, with the government proposal possibly postponed until next year

The South Korean government is formulating the "Basic Law on Digital Assets" (Phase Two Legislation on Crypto Assets), which is expected to include several investor protection measures, such as introducing strict liability for digital asset service providers and establishing a bankruptcy risk isolation mechanism for stablecoin issuers. However, due to significant disagreements on core issues such as the entities issuing stablecoins, the submission timeline for the government proposal is expected to be delayed until next year.

According to reports, in the government draft that the Financial Services Commission is studying, stablecoin issuers may be required to allocate their reserve assets to low-risk assets such as deposits and government bonds, and to deposit or trust funds not less than 100% of the issuance balance with banks or other management institutions to prevent the risk of issuer bankruptcy from being passed on to investors. At the same time, the information disclosure obligations, terms, and advertising regulatory standards for digital asset operators will be close to those of traditional financial institutions. In the event of a hacker attack or system failure, strict liability may be applied in accordance with the Electronic Financial Transactions Act. Additionally, the draft may allow the sale of digital assets within South Korea under the premise of strengthening information disclosure, in order to correct the previous practice of "overseas issuance, domestic circulation" caused by administrative restrictions on ICOs.

Although the legislative framework has taken initial shape, there are still disagreements between the Financial Services Commission and institutions such as the Bank of Korea on key issues such as the qualifications of stablecoin issuers, approval mechanisms, minimum capital requirements, and whether exchanges can serve both issuance and circulation functions. The Financial Services Commission stated that relevant departments are continuously working to narrow the gap in positions and have not yet reached a conclusion on the final proposal.