[Financial News] The government’s draft of the General Act on Digital Assets, cited by the ruling camp as a prerequisite for taxing virtual assets, is expected to be released within this month.
A proposal is gaining traction to give virtual asset exchanges a grace period to fully implement the regulations limiting major shareholders’ stakes, giving the exchanges “time to spare.”
Political sources and financial authorities said on the 8th that the Financial Services Commission is conducting final work, including consultations with relevant agencies, ahead of releasing the government’s draft of the Digital Asset Act.
The Digital Asset Act is a sweeping bill that would bring into the regulatory framework areas not covered by the existing legal system, including stablecoin issuance and distribution, requirements for virtual asset service providers, and exchange regulations.
Financial Services Commission Chairman Lee Eog-weon initially said the law would reach 135 articles, but the final draft is expected to contain even more.
The proposal considered most likely for the long-debated cap on major shareholders’ ownership stakes in virtual asset exchanges is to allow ample time for compliance, according to reports.
Authorities believe that exchanges should have governance structures commensurate with their status, role and responsibilities, which will grow as the virtual asset exchange registration system is replaced by a licensing system.
To address excessive concentration of profits among a small number of founders and shareholders, as well as their excessive control, the law is expected to impose an ownership cap of 15–20%, in line with the level for alternative trading systems (ATS) under the Financial Investment Services and Capital Markets Act.
A proposal to give virtual asset exchanges a grace period to fully comply with the rules is gaining traction. For example, they could be given one to two years to adjust major shareholders’ stakes to meet the requirements, without facing penalties during that period.
Some observers also expect that, amid constitutional controversy over how to limit major shareholders’ stakes, restricting voting rights instead of ownership stakes could be proposed as a less restrictive alternative.
Another point of contention, the entity authorized to issue stablecoins, is expected to be a bank-centered consortium, as advocated by the Bank of Korea.
The BOK-backed position that stablecoins should be issued through bank-centered consortia to ensure operational stability has faced opposition from those who argue that more technology companies, including fintech firms, should participate to expand the potential for innovation using stablecoins.
These provisions could well be revised later during parliamentary deliberations on the bill. Financial authorities will release the government’s draft, outlining the framework and main provisions of the Digital Asset Act, at the end of this month, while the bill itself will be pursued through legislation introduced by lawmakers.
The Digital Asset Act is also expected to establish a legal basis for preventing a recurrence of Bithumb’s large-scale erroneous Bitcoin payout incident earlier this year.
Measures could include imposing no-fault liability for damages on virtual asset service providers in the event of hacking or IT system failures, and specifying violations—such as failing to meet the obligation to hold virtual assets in actual possession—as grounds for penalties, including suspension of business.
Deliberations on the Digital Asset Act have dragged on because it involves formalizing the virtual asset trading ecosystem and establishing a new legal framework. But momentum is now building in earnest, as the ruling camp has recently postponed virtual asset taxation and made enactment of the Digital Asset Act a prerequisite.
Democratic Party of Korea (DPK) leader Kim Min-seok asked the government on the 4th to postpone once again the taxation of virtual asset income, which had been scheduled to take effect next year. “After comprehensively considering taxation principles, domestic industry conditions and fairness among users, it is advisable to first enact the General Act on Digital Assets, establish an overall framework, and give companies and investors time to adapt,” he said.
The virtual asset industry hopes the Digital Asset Act will set out specific standards, including for business licensing, to prevent confusion in the field, and include measures not only to regulate the sector but also to strengthen its competitiveness.
[email protected] Jang Min-kwon Reporter