Current Affairs Privacy Coins

South Korea's Stablecoin Reckoning: New Rules, Old Tax Battles

2026-07-29

South Korea's ruling Democratic Party has just proposed something that's been overdue: a Digital Asset Basic Act. This thing actually tries to create a legal framework for issuing, trading, holding and supervising digital assets. The Ministry of Economy and Finance announced it on July 14, 2026, and they want it passed by the end of the year. For one of Asia's most active crypto markets, this is a big moment. Regulatory uncertainty has been the default mode here, even though the industry is mature and massive.

What the bill actually does is consolidate a fragmented mess. Right now, competing proposals have jammed up the legislative process. The new framework introduces licensing, registration and reporting requirements for digital asset businesses—trading, brokerage, custody, advisory, all of it. For stablecoin issuers specifically, there's the hard stuff: they need authorization, strict reserve standards, capital requirements, operational rules. The legislation splits digital assets into two buckets: "general" and "asset-linked" types. Stablecoins sit in the asset-linked category, which means tighter scrutiny from the Financial Services Commission.

Here's the detail that matters. Stablecoin issuers must maintain reserves exceeding 100 percent of circulating supply. These reserves get held at banks or approved institutions and kept separate from the issuer's own balance sheet. That's designed to limit contagion if something goes wrong. It's also the kind of thing regulators argue about. The Bank of Korea, for instance, thinks only banks with 51 percent ownership should be allowed to issue KRW-pegged stablecoins. Bureaucratic, yes. Strategic, absolutely.

But here's where it gets complicated. While the FSC is pushing stablecoin regulation forward, South Korea's opposition party is pushing back hard on the tax side. They've proposed a bill to repeal a planned 22 percent tax on cryptocurrency gains, scheduled to kick in January 2027. The logic: crypto investors get treated unfairly because South Korea already repealed a broader tax on gains from traditional financial products. Song Eon-seok introduced the proposal, and it's gaining real traction.

The numbers tell the story. Investors earning more than 2.5 million Korean won (about $1,800) annually from crypto activities will face this tax—20 percent income tax plus 2 percent local tax. That affects roughly 13.26 million investors. A petition to repeal the tax hit 50,000 signatures, which forces the National Assembly to review it. Now both the tax repeal bill and the stablecoin framework are sitting in parliamentary committees.

The Ministry of Economy and Finance has confirmed that the crypto tax will go ahead as planned, despite the noise. Moon Kyung-ho, the ministry's income tax director, made what appears to be the first public confirmation from the ministry that the framework will move forward after three previous postponements—originally 2022, then 2023, then 2025, and now 2027. This tax has been delayed so many times that the confirmation itself is news.

What you're watching is a government trying to regulate stablecoins while its own political establishment argues about whether taxing crypto gains is fair. Both things are advancing toward some kind of resolution before year-end. Whether either one actually passes remains unclear.

Source & further reading:

Sources