In June 2025, Korea took another step toward building a comprehensive regulatory framework for digital assets by passing the Digital Asset Basic Act of Korea (DABA). This DABA, once fully implemented, will complement the Korean Virtual Asset User Protection Act (VAUPA) and create clearer licensing, reserve, and operational obligations for stablecoin issuers and other digital asset businesses. The full details of the act’s implementation are not yet known, and we will update the reader as more information becomes available.
Stablecoins, digital tokens pegged to fiat currency or other reference assets, have been a particular focus of Korean regulators, both due to their potential to support payments and recent scandals, as well as their systemic risk implications. Companies engaging with stablecoins in Korea should understand how the new framework interacts with VAUPA and the obligations that will apply.
A Guide to Korea’s Digitial Asset Basic Act
by IPG Legal
The Korean Digital Asset Basic Act
The DABA is intended to be Korea’s first comprehensive umbrella law governing digital assets. Its goals, facially, are to:
- Define digital assets more broadly than VAUPA, including stablecoins, NFTs, and certain tokenized assets.
- Establish licensing requirements for issuers, custodians, and trading platforms.
- Set prudential standards for reserve management, disclosures, and audits.
- Create a supervisory authority for the Financial Services Commission (FSC) to regulate and sanction violations.
While VAUPA (effective July 2024) focused primarily on user protection, exchange registration, and unfair trading practices, the DABA seeks to fill gaps by addressing issuance, reserve backing, and systemic risk. In essence, it is regulating a stablecoin in a manner akin to other financial instruments.
Korean Stablecoin Licensing and Issuer Obligations
1. Licensing
Under the DABA, any entity that issues or manages stablecoins in Korea must obtain a stablecoin issuer license from the FSC. Key requirements include:
- Demonstrating adequate governance and risk management structures.
- Maintaining minimum capital requirements.
- Submitting compliance and risk reports periodically.
2. Reserve Requirements
Korean Stablecoin issuers will be required to:
- Hold reserves in high-quality, liquid assets such as Korean government bonds, cash, or deposits in licensed financial institutions.
- Maintain a one-to-one backing ratio between issued stablecoins and reserve assets.
- Subject to independent audit and public disclosure.
These rules are designed to prevent “algorithmic stablecoin” failures of the type seen internationally in 2022.
3. Redemption Rights
Holders of Korean stablecoins will have a legal right to redeem their tokens for the underlying fiat currency at par value. Redemption delays or restrictions will be tightly limited under the Act and may lead to sanctions and even criminal penalties.
4. Reporting and Supervision
Issuers must provide quarterly reserve audits, notify regulators of material risk events, and comply with anti-money laundering (AML) and counter-terrorist financing (CTF) obligations.
The VAUPA Interplay
The Virtual Asset User Protection Act (VAUPA) remains the foundation of Korea’s crypto framework, covering:
- Exchange registration and licensing for Virtual Asset Service Providers (VASPs).
- Prohibitions on unfair trading practices (insider trading, wash trading, market manipulation).
- Insurance obligations for VASPs to protect users from hacks and theft.
Stablecoin issuers in Korea will now face dual compliance issues:
- VAUPA obligations if they operate an exchange, wallet, or other VASP function.
- DABA obligations if issuance, reserves, and redemption of stablecoins.
For multinational businesses, this dual framework requires careful structuring of operations, and separating exchange activities from issuance entities, and ensuring consistent compliance.
Practical Implications for Businesses
- Foreign Issuers: Overseas stablecoin projects targeting Korean users will likely need to establish a licensed Korean entity or partner with a licensed domestic institution. We will write more on this when more information becomes available.
- Korean Financial Institutions: Banks and securities firms may seek to issue their own stablecoins under the new framework, potentially integrated with payment or remittance services.
- Investors and Exchanges: Exchanges listing stablecoins will need to confirm that issuers comply with reserve and licensing obligations to avoid liability and even criminal sanctions.
Enforcement Trends and Risks
Korean regulators have signaled that they will apply strict scrutiny to reserve sufficiency and disclosure practices. Recent enforcement under VAUPA suggests that non-compliant issuers risk:
- Administrative fines.
- Suspension of operations.
- Criminal liability for fraud or misrepresentation.
The Digital Asset Basic Act represents a watershed moment for Korea’s digital asset market. By imposing licensing, reserve, and disclosure requirements on stablecoin issuers, it seeks to stabilize the sector and align Korea with some global regulatory trends.
For businesses, the message is clear: stablecoins will be treated more like financial instruments than unregulated crypto products. Compliance with both the DABA and VAUPA will be essential to operate legally and competitively in Korea.
This article was prepared by the attorneys of IPG Legal. It is based on our ongoing work advising financial institutions, digital asset platforms, and technology companies in Korea.
Sean Hayes is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as a Top Attorney by AsiaLaw, and IPG Legal is consistently ranked Top Dispute Resolution Law Firm for our litigation services.
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