The Bank of Korea (BOK) has stated that it is seeking increased statutory authority to regulate stablecoins.
BOK revealed its position in a report published on December 11 as part of its efforts to control the growing digital asset industry. The banking regulator stated in the statement that stablecoins posed a risk to the country’s financial stability if they were widely used instead of traditional currencies.
Compliance with Korean Laws
The central bank stated that stablecoins pegged to foreign currencies must adhere to South Korean foreign exchange laws. It was noted that stablecoins pegged to the Korean won are automatically subject to the central bank’s supervision.
The use of stablecoins in South Korea has increased in tandem with the speculative use of digital assets. To protect themselves from the swinging volatility that characterizes the virtual currency industry, Koreans have turned to dollar-pegged digital assets.
The de-pegging of TerraUSD (UST), Terra’s algorithmic stablecoin, however, resulted in billions of dollars in losses for thousands of South Korean investors. The black swan incident fueled calls for the central bank to take a more active role in regulating stablecoins, citing the need to protect investors.
Issuers to Get Sterner Appraisals
The BOK report discussed the concept of stablecoins, the need for special regulation, domestic and international trends, and legislative considerations. According to the proposed plans, stablecoin issuers will be subject to the same stringent regulations as banks and other financial institutions, while ensuring that the assets are fully backed by cash or other acceptable forms.
Apart from the central bank’s proposal to regulate stablecoins, South Korean investors are bracing for an onslaught of new industry regulations. The Digital Asset Basic Act, which has been in the works since 2021, is one of the incoming legislation for the industry.
The country postponed plans to begin taxing digital asset gains until 2025, with a 20% levy imposed on profits exceeding $1,860. Other changes include taxes on inherited and airdropped tokens.
The Ministry of Science and ICT (MSIT) of South Korea has revealed a metaverse strategy as well as ethical principles for users and industry service providers. Although the principles lack legal force, they serve as a guide for the operation of virtual worlds in the country, focusing on inclusiveness, respect for privacy, fairness, autonomy, and others.
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