[New Government Digital Asset Strategy ③] Draft Framework Act Emerges, Speeding Up Institutionalization

# South Korea Intensifies Efforts on Digital Asset Legislation Amid Political Dynamics As the National Assembly hastens discussions to establish foundational laws for digital assets, attention is increasingly focused on policy directions and legislative schedules. Several draft bills, proposed by ruling party lawmakers, are expected to be unveiled later this month. Additionally, the South Korean government has announced it will release its legislative version in the second half of this year, indicating significant progress toward digital asset regulation. With the legislative discussions advancing concurrently between the government and the National Assembly, stakeholders are keenly observing the development of the regulatory framework for digital assets. Adding to the complexity, potential changes in the leadership of the Financial Services Commission (FSC) could impact the pace and direction of these legislative efforts. # Ruling Party to Unveil Drafts from Two Factions Inside the ruling Democratic Party, two factions are preparing separate drafts of a foundational law on digital assets. One group, led by the Digital Assets Committee chaired by Representative Min Byung-deok, and another led by the political oversight committee headed by Representative Kang Jun-hyun, are actively working on their respective versions. Representative Min initiated discussions by officially introducing a comprehensive legislative proposal on digital assets on October 10. His bill aims to clarify the definition of digital assets and outline regulatory measures, including entry and operational guidelines, issuance procedures, disclosure requirements, and prohibitions on unfair trading practices. It places a specific emphasis on stablecoins, providing detailed regulatory requirements to balance industry development and user protection. The oversight committee, orchestrated by Representative Kang, has been conducting a series of forums since early 2023 to deliberate on legislative directions and key issues. The resulting draft, developed in collaboration with the Korea Fintech Industry Association, is expected to be unveiled shortly. A public briefing is set for October 17 to provide further insights into the committee’s draft, including its essential provisions and contentious points. # Diverging Visions on Core Issues Between Drafts While the full contents of Representative Kang’s draft remain undisclosed, significant differences between the two proposals are emerging. A key divergence is in the authority over listing examinations, the role of regulatory associations, stablecoin oversight, and licensing frameworks. Representative Min’s draft assigns listing examination authority to a newly established legal association, aiming to confer a quasi-public role on the organization. This intends to enhance regulatory efficiency and coherence by separating supervisory functions from auditing tasks. Conversely, Representative Kang’s draft appears to maintain listing authorities within exchanges while designating the association as a centralized operational entity for disclosures. This approach seeks to streamline information access and improve market transparency, inspired by the electronic disclosure system operated by the FSC. # Government Plans for Second-Phase Legislation Parallel to the National Assembly’s initiatives, the government, under the direction of the FSC, is advancing its second-phase legislative process for digital asset regulation. During a meeting in January presided over by Kim So-young, FSC’s Vice Chairman, the commission identified key policy priorities, including entry regulation adjustments, stablecoin governance, and the establishment of listing and disclosure frameworks. The government plans to release its legislative proposal in the latter half of 2023. Speculation surrounding potential changes in the FSC’s leadership adds uncertainty to the legislative momentum. Although current Chairman Kim Byung-hwan has over two years left in his term, reshuffles in top financial officials often coincide with changes in administration. # Leadership Succession Speculations—Presidential Vision is Crucial Prominent candidates for the FSC Chairmanship include Do Kyu-sang, a former Vice Chairman of the FSC and current head of Samjong KPMG's Economic Research Institute, and Sohn Byung-doo, a former CEO of the Korea Exchange and current head of Toss Insight. Both have previously expressed perspectives on digital assets. Sohn, during his tenure at the Korea Exchange, underscored the growing significance of digital assets as mainstream investment instruments, advocating for a regulatory framework. He suggested that entities like the Korea Exchange could play essential roles in market monitoring, disclosure, and clearing functions. Do, during his tenure at the FSC, addressed digital asset instability and regulatory needs, emphasizing policy solutions such as self-regulation, consumer protection, and measures against unfair trading practices. He also contributed to discussions on non-fungible tokens (NFTs) and their potential regulatory frameworks. Despite speculation, many industry experts believe that the success of digital asset institutionalization relies more on presidential resolve than on leadership changes. "While the identity of the FSC Chair remains significant, the ultimate success of regulation hinges on clear directives from the President," said a legal expert specializing in digital assets. "If the President sets a decisive policy tone, government agencies will follow suit. Without such resolve, even rapid personnel appointments may leave pressing issues unresolved." As legislative and governmental processes unfold, all eyes are on South Korea's ability to establish a robust digital asset framework that balances innovation with market stability.