The Korea National Policy Committee has postponed discussion of the “Phase Two” cryptocurrency law until after the local elections on June 3.
The cryptographic framework has been delayed in its time of need
According to the Korean newspaper Mail Business Uncertainty in the cryptocurrency industry deepened after the National Policy Committee ruled out the Framework Law on Digital Assets from 31street March agenda.
Lawmakers sent five finance-related bills to the subcommittee that day: the Administrative Regulation Framework Act, the Credit Information Protection Act, the Microfinance Support Act, the Insurance Business Act, and the Capital Markets Act. Not a single draft law related to cryptocurrencies was included, but the plenary session of the Political Affairs Committee received “partial amendment from Rep. Kim Nam-gyun to the law on the protection of users of virtual assets, etc.” He referred it to the subcommittee to review the draft law.
Lawmakers chose to halt the Phase 2 bill during a sensitive election period rather than impose divisive provisions on banks and stock tycoons, which have become “primary landmines” in the legislative process. Speculation in Korean political coverage suggests that the presidential office and the Financial Services Commission (FSC) are not fully in agreement on how far to push ownership boundaries and how tightly to cordon off stablecoin issuance, adding to the stalemate.
The proposed cryptocurrency framework comes at a very important time, as the above-mentioned political controversies also represent the two major battles taking place between the major players in the Korean cryptocurrency space and the financial industry.
Battle of stablecoins
South Korea recently witnessed a tug of war between the Bank of Korea and the Financial Services Commission over who can issue won-denominated stablecoins.
The Bank of Korea is pushing for a bank-led union model where commercial banks must hold at least 51% of any issuer of won-denominated stablecoins. Bitcoinist reported this in October last year.
However, the Financial Services Commission (FSC) accepts that stablecoins need strict collateral He opposes a strict law requiring 51% ownership of banks.It warned that it would shut down technology, fintech and exchange platforms that are already building user-facing products.
The rules for these stablecoin issuers must be fixed under the Digital Asset Basic Law, so every month of delay leaves existing and potential stablecoin issuers of the South Korean won operating in a gray area or stuck on the sidelines. according to Local outlet Aju EconomyThis is a real and troubling issue for the industry. They reported on the industry insider’s laments:
We need to finalize the bill quickly to determine the direction of our business, but for now, we are keeping all possibilities open, which only increases the cost burden.
Equity capital battle
The Financial Services Commission has been supportive of proposals to treat large cryptocurrency exchanges like securities or ATS-style markets, where the “same person” cannot own more than 15% to 20% in principle. After intense resistance, regulators and the ruling party coalesced around a 20% cap for “major shareholders,” with a narrow exception allowing stakes of up to 34% for new entrants, mirroring the 33.3% veto line in Korean commercial law. Bitcoinist covered the story early last month.
For existing giants like Upbit and Bithumb, this is a retroactive rule. Founders and early backers already own stakes exceeding 20%, so a hard cap would force them to sell significant portions of their shares over a three-year transition period (six years for some smaller exchanges). This may disrupt ongoing mergers and acquisitions and reshape control of the local market.
What does this mean for the market?
South Korea appears ready to move from ad hoc crackdowns to a comprehensive cryptocurrency regime. This delay comes on top Recent moves by Seoul to strengthen censorship through strategies such as artificial intelligence surveillanceand fraud investigations and tax tracking, and the easing of some restrictions, such as relaxing previous proposals regarding exchange stakes and reconsidering cryptocurrency trading for companies.
In the near term, uncertainty over Korean won stablecoins and exchange ownership could keep risk premiums on Korean venues high and make local listing or market-making plans more difficult to model. Post-election, a stablecoin framework that relies heavily on banks, combined with stricter governance rules, could favor established companies and well-capitalized banks over smaller, high-beta platforms. This could lead to a reshaping of liquidity and altcoins.
Lawmakers relaxing ownership limits or opening up the issuance of stablecoins outside banks would be a clear signal of risks for KRW-denominated products and for global companies eyeing a retail base in Korea.
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