How Will Regulatory Uncertainty Impact South Korean Banks’ Stablecoin Ambitions?

South Korea’s banking sector has moved swiftly into the stablecoin arena, filing multiple trademark applications and signaling a readiness to launch won-pegged digital assets. However, the regulatory landscape remains unsettled.

The proposed Digital Asset Basic Act, introduced in June 2025, outlines requirements for strong reserve management, bankruptcy protection, and minimum equity capital for issuers but has yet to be enacted into law.

Banks are proceeding with stablecoin initiatives in anticipation of regulatory clarity, but the lack of finalized rules leaves them exposed to sudden policy shifts. This uncertainty could delay product launches, complicate compliance planning, and increase operational risk for both banks and their customers.

Lessons from the Terra-Luna Collapse Inform Cautious Policymaking

Regulatory caution is shaped by South Korea’s troubled history with stablecoins, notably the 2022 Terra-Luna collapse that wiped out billions in market value and eroded public trust. The Digital Asset Basic Act aims to prevent similar crises by requiring stablecoin reserves to be segregated and protected and by mandating rigorous oversight by the Financial Services Commission.

Despite these safeguards, the absence of clear, enforceable rules means banks must navigate a landscape of evolving expectations. The memory of past failures compels regulators to prioritize investor protection and market stability, which may slow the approval and rollout of new stablecoin products.

Did you know?
South Korea’s proposed Digital Asset Basic Act was partly inspired by the global fallout from the Terra-Luna collapse, which remains one of the largest stablecoin failures in history.

Gradual Introduction Favored by Policymakers

South Korea’s central bank has advocated a cautious, phased approach, suggesting that only rigorously regulated commercial banks should initially be permitted to issue won-denominated stablecoins. This strategy is intended to minimize systemic risk and allow regulators to monitor the impact on monetary policy and financial stability.

The government’s progressive stance, under President Lee Jae-myung, supports stablecoin innovation but insists on a robust regulatory framework to prevent capital outflows and illicit activity. Ongoing legislative discussions reflect the challenge of balancing rapid fintech innovation with the need for comprehensive oversight.

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Investor Optimism Faces Headwinds from Regulatory Delays

The recent surge in bank stocks following stablecoin trademark filings underscores strong investor enthusiasm for digital asset initiatives. However, this optimism may prove fragile if regulatory uncertainty persists or if new rules impose unexpected burdens on issuers.

Market participants are closely watching the National Assembly’s deliberations on the Digital Asset Basic Act. Delays or ambiguities in the final legislation could dampen momentum, while clear and supportive rules would likely accelerate stablecoin adoption and position South Korea as a leader in digital finance.

Banks Must Prepare for a Complex, Evolving Regulatory Environment

South Korean banks are at the forefront of a digital asset revolution, but their ambitions hinge on the timely establishment of clear, enforceable regulations. As policymakers refine the legal framework, banks must invest in compliance, risk management, and customer education to ensure long-term success.

The outcome of the current legislative process will determine whether South Korea’s financial sector can safely and competitively integrate stablecoins or whether regulatory uncertainty will stall progress and undermine investor confidence.