South Korea advances stablecoin bills amid interest rate disagreement

• Regulation of stablecoins gains momentum in Parliament
• Proposals differ on the application of interest to users
• FSC may regulate and authorize stablecoin issuers

The two main matches South Korean politicians have introduced separate legislative proposals focusing on regulating stablecoins backed by the won (KRW). While they agree on several technical points, the bills differ on the payment of interest to users of these digital currencies.

On July 28, Representatives An Do-geol of the Democratic Party (DP) and Kim Eun-hye of the People's Power Party (PPP) filed their respective bills. The former was titled the "Act on the Issuance and Distribution of Stable-Value Digital Assets," while the latter was titled the "Act on Payment Innovation with Fixed-Price Digital Assets."

Both proposals provide for the inclusion of stablecoins in the country's financial institutional framework, establishing clear rules for issuance, circulation, and redemption. The texts indicate that the Financial Services Commission (FSC) will be responsible for comprehensive oversight of the sector, including granting licenses and the ability to issue emergency orders in cases of market risk or consumer harm.

According to the plans, only regulated financial institutions or companies incorporated as joint-stock companies will be able to issue stablecoins. Foreign companies will be required to have a branch or operational office in South Korea. Furthermore, all issuers must demonstrate a minimum equity capital of 5 billion won (approximately US$3,6 million) and maintain dedicated technical teams and experienced professionals in the sector.

The main disagreement between the parties revolves around the inclusion of mechanisms that allow interest payments on balances held in stablecoins. This point is likely to generate debate among lawmakers in the next stages of the legislative process, as it raises questions about the role of cryptocurrencies within the traditional financial system and their potential equivalence with conventional banking products.