Over the past few years, digital finance and blockchain technology have rapidly spread worldwide. As a result, virtual assets have become an integral part of the global economic system, with digital assets like stablecoins gaining particular attention as a means to ensure financial stability. However, South Korea occupies a unique position within this trend. While the domestic virtual asset market is growing actively, laws and regulations remain in their nascent stages, hindering development. Experts have consistently called for a comprehensive regulatory overhaul that reflects the industry's structure. South Korea first established its virtual asset regulatory framework in 2021 through the amendment of the Act on Reporting and Using Specified Financial Transaction Information (Special Act). The Special Act contributed to enhancing the transparency of virtual asset transactions by introducing anti-money laundering (AML) obligations and a reporting system for virtual asset service providers. Subsequently, in July 2024, the Virtual Asset User Protection Act came into effect, primarily focusing on the segregated storage of user assets and the prohibition of unfair trading practices. This law mandates virtual asset exchanges to store customer assets separately from their own and prohibits unfair trading activities such as market manipulation or the use of undisclosed information. However, attorney Kim Hyo-bong of law firm Bae, Kim & Lee LLC sharply criticized the current situation at the 2026 Blockchain Meetup Conference, stating, "While these laws have succeeded in preventing accidents, they have failed in fostering the overall industry." Attorney Kim pointed out that "soundness regulations, governance rules, and security-related systems necessary from market entry to operational processes and exit are not yet sufficiently established," emphasizing that the current Special Act and User Protection Act are inadequate to cover the entire virtual asset market. This limited regulatory framework hinders long-term market growth and underscores the need for a new regulatory approach that reflects the industry's structure. As discussions for Phase 2 legislation, centered on stablecoin regulation, progress, South Korea's virtual asset regulation is reaching a new turning point. Stablecoins are digital assets pegged to fiat currencies or commodities like gold, maintaining a stable value, and have recently played a crucial role in global financial markets as a means of payment and a store of value. Following the implementation of the Virtual Asset User Protection Act in 2024, financial authorities and the National Assembly formed a task force (TF) for Phase 2 legislation, engaging in in-depth discussions. In 2025, several bills benchmarking regulations like the European Union's Markets in Crypto-Assets (MiCA) were proposed. However, progress on the legislation has been slow due to a conflict of opinion between the Financial Services Commission (FSC) and the Bank of Korea (BOK) regarding the key issue of stablecoin issuer requirements for Phase 2 legislation. The FSC supports an industrial policy perspective that strengthens industrial competitiveness by allowing fintech companies to participate, while the BOK prioritizes monetary stability and demands a bank-centric consortium model. Specifically, the '50%+1 share rule' advocated by the Bank of Korea stipulates that banks must hold a majority stake in stablecoin issuance consortia, a measure aimed at ensuring monetary policy stability. Conversely, the FSC is concerned that such stringent requirements could impede the market entry of innovative fintech companies and hinder industrial development. Stablecoin Legislation Discussions and Key Conflicts Adding to this complexity, the issue of equity ownership limits for virtual asset exchanges has sparked constitutional controversy, and significant difficulties are anticipated during the bill's passage due to concerns about its constitutionality raised even within the ruling party. Although attempts are being made to reach a compromise through party-government consultations, the timing for the proposal of Phase 2 legislation, including stablecoin regulations, remains uncertain. These conflicts and uncertainties highlight the absence of a clear roadmap for the development of the domestic virtual asset industry, exacerbating anxiety among market participants. Experts are analyzing the impact of such regulations on the domestic industry environment and investor confidence from various perspectives. Attorney Kim Hyo-bong emphasized, "Virtual asset regulations, including stablecoins, can serve as a key factor in securing long-term financial stability and legitimacy, beyond merely fostering industrial growth." He stated that establishing proactive prevention mechanisms is paramount to preventing virtual asset crimes and strengthening market trust. Furthermore, satisfying the dual objectives of enhancing international market competiti
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