Under the Digital Assets Basic Law, the South Korean central bank plans to allow institutions to issue new cryptocurrencies under the “shareholder financing” model.Initial Coin Offering”, known as ICO, for its acronym in English.
According to a publication made by InfoMax, one of the main news agencies in the country, the Central Bank of South Korea has said that Cryptocurrencies and digital assets must be able to be issued within the national territory.
South Korea has been known to maintain a fairly strict stance towards the cryptocurrency industry, banning ICOs in 2017 and limiting access to digital assets in order to protect investors from the volatility of the crypto market and ensure the stability of its current financial system.
South Korea's Digital Assets Basic Law
However, the monetary authority acknowledges that cryptocurrency issuing companies have been establishing legal entities abroad to launch cryptocurrencies and related products. These, in turn, have sought ways to list such cryptocurrencies on regulated exchanges and markets in the country, expanding investors' exposure to various crypto assets.
Because of this, the South Korean Central Bank considers it more appropriate and safer for its investors to allow companies and institutions to issue their own cryptocurrencies in Korean territory, within the framework of the Basic Law on Digital Assets.
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South Korea's Digital Assets Basic Law It was first proposed in October 2020, when the country's National Assembly recognized the need to boost the economy through digital transformation, to ensure the development of financial industries and become a leading nation in technological innovation.
The law is expected to be ready next year, although it will not be implemented until 2024, as the country's current president, Yoon Suk-yeol, indicated in May.
South Korea prepares to regulate cryptocurrencies as investment assets
South Korea's central bank is changing its stance on cryptocurrencies, moving from a hostile stance that has been in place for years to a more positive one, where cryptocurrencies like Bitcoin will have their own space.
According to local media, South Korea's monetary authority has said that will regulate arbitration with decentralized cryptoassets such as Bitcoin, which lack an issuer, in addition to their use as a store of value against inflation under the Digital Assets Basic Law. The bank notes that necessary regulations must be implemented to ensure investor protection, while providing sufficient safeguards to ensure the transparency of transactions in the crypto market.
Stablecoins as a means of payment
On the other hand, in relation to stablecoins, the bank indicated that Stablecoins will be accepted as means of payment and exchange of value, because by its design reduce the volatility of the crypto market and provide greater stability to investors and users. However, due to the events that caused the great fall of the Terra ecosystem in May, the entity could adopt as an example the approach of the MiCA Law (Markets in Crypto Assets), the law that regulates cryptoasset markets in Europe, to guarantee the protection of its investors without hindering the development and innovation of the crypto and blockchain industry.
The MiCA law is currently in the midst of its own controversy, with organizations such as Blockchain for Europe and the Digital Euro Association asking MEPs to review the law to remove restrictions it may impose on stablecoins referenced to the dollar or other foreign fiat currency in EU member countries.
The lack of regulation of cryptocurrencies and stablecoins led the South Korean government to create a digital asset committee to deal with the debacle caused by Terra, after the fall of the cryptoassets UST and LUNA.
In favor of a friendly regulation for the crypto space
Korean President Yoon Suk-yeol promised Lift unreasonable bans that weigh on cryptocurrencies in the country to establish a much fairer and more friendly regulation, although this will not stop imposing sanctions on those who fail to comply with current regulations.
Continue reading: South Korea plans to regulate and institutionalize cryptocurrencies in 2024
