As a seasoned researcher with a keen interest in global financial markets and regulations, I find the recent move by South Korea’s Ministry of Strategy and Finance to tighten stablecoin regulations particularly intriguing. Having closely followed the evolution of digital currencies and their impact on various economies, it is clear that stablecoins have emerged as a significant player in cross-border transactions.
On October 8, South Korea’s Ministry of Strategy and Finance revealed plans to tighten control over stablecoins by conducting a thorough review.
This decision comes amidst increasing criticism that stablecoins are emerging as a hidden threat in the foreign exchange landscape due to inadequate government oversight.
Rising Cross-Border Use and Industry Criticism
As per news from local sources, the Ministry emphasized that stablecoins are mostly utilized for transactions and exchanges within the digital assets market, and their importance in international transactions is growing significantly.
Officials anticipate that these functions could shortly become significant methods for payments and transactions within the actual, or real, economic system.
The Financial Services Commission (FSC) has chosen to give special attention to stablecoins during the second stage of the Virtual Asset User Protection Act (VAUPA). According to an FSC representative, they aim to collaborate with related ministries by examining legislative examples from countries like Japan and the European Union.
This initiative arises during a time when there’s rising unease among industry specialists, who contend that the country has been tardy in addressing the escalating adoption of stablecoins in commercial transactions. Critics claim that the government is only now scrutinizing relevant legislation due to apprehensions about potential inconsistencies in macroeconomic policy implementation.
As a researcher delving into the dynamic world of financial markets, it’s evident that Stablecoins have been steadily rising in significance. Particularly notable is Tether, whose holdings of U.S. Treasury bonds currently stand at approximately $97.6 billion. Interestingly, this figure is nearly touching South Korea’s holdings of $116.7 billion, a position that ranks 18th globally. This underscores the growing influence of Stablecoins in the global financial landscape.
Given these circumstances, it becomes necessary for our country’s administration to enforce foreign currency rules on financial dealings. As a government representative stated, such measures are being implemented.
“Stablecoin regulations will begin with establishing a system for issuing won-pegged coins.”
South Korea’s Regulatory Framework
While South Korea does not have specific regulations for stablecoins tied to its currency, the European Union (EU) and Japan have implemented legislation for these digital assets via the Markets in Cryptocurrencies Act (MiCA).
To ensure stability, at least one third of customer deposits must be kept separate from the exchange. Additionally, all cross-border transactions must be recorded in logs. Nations such as the United States, United Kingdom, and Australia are moving forward with similar regulations.
South Korea is shaping its legal structure, drawing on global examples. Notably, they are loosening restrictions preventing businesses from managing virtual asset accounts, and they now permit the recording of stablecoin trading transactions within their official records.
In the early part of this year, a new policy, known as VAUPA, was implemented. This policy requires cryptocurrency platforms such as Upbit and Bithumb to start paying regulatory fees from 2025, with the amount being determined by their earnings.
This law stipulates that platforms must maintain at least 80% of user funds in offline (cold) storage, thus minimizing investment risks. Additionally, it calls for periodic evaluations of assets listed for trade; any assets that fail to meet the set standards will be removed from the list.
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2024-10-09 23:20