South Korea's Basic Law on Digital Assets is proposed to include no-fault compensation and stablecoin bankruptcy isolation mechanisms; the government's proposal may be postponed until next year.

On December 30th, the South Korean government's draft "Digital Asset Basic Law" (the second phase of legislation for crypto assets) proposes to include several investor protection measures, including introducing no-fault liability for digital asset service providers and establishing a bankruptcy risk isolation mechanism for stablecoin issuers. However, due to significant disagreements surrounding core issues such as the issuers of stablecoins, the government's submission of the draft is expected to be postponed until next year.

The report states that in the draft law being studied by the Financial Services Commission, stablecoin issuers may be required to allocate their assets to low-risk assets such as deposits and government bonds, and to deposit or entrust at least 100% of the outstanding balance to banks or other management institutions to prevent the risk of issuer bankruptcy from being passed on to investors.

Furthermore, the draft law may allow the sale of digital assets within South Korea, provided that information disclosure is strengthened, to correct the previous practice of "overseas issuance, domestic circulation" established due to administrative restrictions on ICOs. Although the legislative framework has taken initial shape, disagreements remain between the Financial Services Commission and the Bank of Korea, among other institutions, on key issues such as the qualifications of stablecoin issuers, approval mechanisms, minimum capital requirements, and whether exchanges can simultaneously perform issuance and circulation functions. The Financial Services Commission stated that relevant departments are continuing to narrow the gap in their positions and have not yet reached a final decision on a solution. (Source: Yonhap News Agency)