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South Korea to tighten stablecoin rules amid forex concerns

South Korea to tighten stablecoin rules amid forex concerns

GrafaGrafa2024/10/10 03:45
By:Liezl Gambe

South Korea’s Ministry of Strategy and Finance is preparing to tighten regulations on stablecoins, according to an announcement on October 8. 

The move comes as concerns rise about the growing use of stablecoins in cross-border transactions and their potential impact on the foreign exchange market. 

Officials highlighted the increasing role of stablecoins in the virtual asset ecosystem and how their influence may soon extend to the broader economy.

The Financial Services Commission (FSC) has prioritized stablecoin regulation in the second legislative phase of the Virtual Asset User Protection Act (VAUPA). 

A spokesperson from the FSC stated, “We plan to consult with relevant ministries by referring to legislative cases in Japan, the European Union (EU), etc.”

Industry experts have criticized the government for reacting slowly to the rising prominence of stablecoins, which are being used more frequently in trade transactions. 

These experts argue that gaps in existing policies have allowed stablecoins to grow without adequate oversight. 

Tether, for example, holds $97.6 billion in U.S. Treasury bonds, nearing South Korea’s $116.7 billion in similar assets.

In response, South Korea aims to implement stricter foreign exchange rules and is considering establishing a system for issuing won-pegged stablecoins. 

This aligns with international practices, as countries like the EU and Japan have already enacted regulations for stablecoins under the Markets in Cryptocurrencies Act (MiCA). 

The rules in these regions include requirements for customer deposits and detailed logging of cross-border transactions.

South Korea’s new regulatory framework will also loosen restrictions on corporations holding virtual asset accounts, and stablecoin transactions may be added to official statistics. 

The VAUPA, introduced earlier this year, will require crypto exchanges to hold 80% of user assets in cold storage and pay supervisory fees based on their income starting in 2025. 

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