The Digital Asset Basic Act (디지털자산기본법), introduced by Representative Min Byeong-deok in June 2025, represents the most significant proposed legislative development in Korea’s cryptocurrency regulatory framework since the Virtual Asset User Protection Act. Unlike VAUPA, which operates primarily through consumer protection mechanisms, the Digital Asset Basic Act would establish a comprehensive legal foundation that treats digital assets as a distinct asset class worthy of its own regulatory apparatus. Understanding what this bill contains—and equally important, what remains contested—is essential for any organization with serious intentions in the Korean crypto market.

The legislation is not yet law. As of April 2026, the bill remains in consultation phases involving the government, the ruling Democratic Party, and relevant stakeholders. However, given that we are now approaching the midpoint of 2026, and the government has repeatedly indicated that implementation is unlikely before late 2026 at the earliest, the substance of the proposed legislation has become sufficiently concrete to warrant detailed analysis. This article examines the core provisions, explores the unresolved disputes, and considers the likely implementation timeline.

Overview: What the Bill Proposes

At its foundation, the Digital Asset Basic Act seeks to accomplish three primary objectives. First, it would introduce a positive authorization regime for digital asset exchanges, replacing the current lighter-touch registration approach. Second, it would establish new legal frameworks for specific categories of digital assets, most prominently stablecoins, with dedicated regulatory approval mechanisms. Third, it would re-legalize initial coin offerings (ICOs) under specified conditions and disclosure requirements, a significant reversal from the near-prohibition that has existed since the ICO boom and subsequent bust of 2017-2018.

The bill’s broader philosophy reflects a regulatory maturation. Rather than treating digital assets as an undifferentiated novelty requiring general prohibition or minimal oversight, it proposes to recognize that different types of digital assets—utility tokens, payment tokens, security tokens, stablecoins—pose meaningfully different risks and warrant differentiated regulatory approaches. This is sophisticated financial regulation. It acknowledges that an exchange that merely facilitates trading in established digital assets presents different risks than an ICO platform that helps launch speculative new projects, or a stablecoin issuer that effectively functions as a monetary or quasi-monetary instrument.

The Exchange Licensing Regime (인가제)

One of the bill’s most consequential provisions replaces the current VAUPA registration framework with an authorization (licensing) regime for digital asset exchanges. The practical distinction matters considerably. Registration typically requires notification and basic documentation. Authorization (인가제) typically involves discretionary approval by regulators based on comprehensive standards around capitalization, operational capacity, risk management, and governance.

Under the proposed licensing framework, the Financial Supervisory Service (FSS) would evaluate applicants against detailed criteria. The bill contemplates minimum capital requirements, though the precise figures remain under discussion. It would require demonstrated competence in cybersecurity, anti-money laundering compliance, and customer service systems. Governance standards would address questions of financial soundness, qualified personnel, and conflict of interest management. The approval process is expected to take several months, similar to banking license review timelines in other jurisdictions.

This represents a genuine tightening of the regulatory environment compared to the current VAUPA registration approach. Existing exchanges operating under VAUPA registration would face transition periods in which they must either meet licensing requirements or cease operations. Regulatory discussions have suggested grace periods, but these remain unconfirmed. For established, well-capitalized exchanges, the licensing requirement is unlikely to be prohibitively burdensome, but it does create material compliance costs and requires active regulatory engagement.

Whitepaper Disclosure Requirements

The Digital Asset Basic Act proposes mandatory whitepaper standards for digital asset projects and ICOs, addressing information asymmetry that has plagued crypto markets globally. The requirements would establish baseline disclosure standards for project fundamentals, team qualifications, use of funds, technology, tokenomics, and risk factors—modeled on securities disclosure but adapted to digital assets. Enforcement mechanisms include civil liability for material misrepresentations and regulatory sanctions.

Mandatory disclosure does not prevent ICOs but creates accountability and ensures more informed investor decisions. The FSS would establish detailed guidance similar to prospectus standards under the Capital Markets Act.

Unfair Trading and Market Manipulation Provisions

The Digital Asset Basic Act proposes to extend unfair trading prohibition and market manipulation enforcement to digital asset markets, defining pump-and-dump schemes, wash trading, spoofing, and similar practices with civil and criminal penalties. This reflects recognition that digital asset markets, having grown in size and significance, warrant similar protections as traditional securities markets.

Implementation details remain unclear regarding enforcement capacity, though the Korea Financial Intelligence Unit and relevant authorities are building surveillance capability. The regulatory intent is clear, and businesses should assume enforcement will gradually increase sophistication.

Stablecoin Authorization: The Unresolved Core Dispute

The most contested element of the Digital Asset Basic Act concerns stablecoin authorization and issuer qualifications. The bill acknowledges that stablecoins—digital assets designed to maintain stable value relative to fiat or other reference assets—present fundamentally different regulatory issues than other crypto assets and warrant regulatory attention focused on user protection and financial stability.

The bill proposes FSS authorization for stablecoin issuers, but what remains contested is eligibility. Should only banks issue stablecoins, or should qualified fintech companies participate? This is a policy question with profound implications for market structure. If only banks are permitted, Korean fintech companies are effectively excluded from this innovation opportunity.

Ongoing government-party consultations address these questions. The ruling Democratic Party has been more sympathetic to non-bank participation, viewing stablecoin authorization as an innovation opportunity. Government agencies emphasize financial stability concerns. The resolution will likely involve compromise—perhaps allowing both banks and specially qualified fintech companies with differentiated standards. We examine stablecoin regulation in detail in (Series Part 3: Stablecoin Regulation).

Major Shareholder Equity Limits and Governance

A second unresolved dispute concerns equity concentration and governance for stablecoin issuers. Should stablecoin issuers face major shareholder equity limits (e.g., prohibition on single shareholders owning more than 10-15 percent)? Such limits are common in banking regulation but create complications for venture-backed fintech companies where early investors naturally accumulate substantial ownership.

The bill contemplates governance standards for stablecoin issuers, but precise equity concentration limits remain under discussion. This reflects a broader regulatory philosophy question: should stablecoin issuers be regulated like banks, or should the framework recognize meaningful differences and adopt differentiated standards? International approaches vary. The EU’s Markets in Crypto-Assets Regulation (MiCA) takes a differentiated approach. Singapore’s Monetary Authority has similarly adopted nuanced approaches. The Korean framework is still being determined.

Implementation Timeline and Transition Provisions

The Digital Asset Basic Act is not yet law, and regulatory discussions continue. The government has repeatedly indicated that full implementation is unlikely before late 2026 at the earliest. This reflects several practical realities. First, the bill must navigate the legislative calendar. Second, regulations and guidance interpreting the bill must be drafted by the FSS and other relevant agencies. Third, existing market participants must be given transition periods in which to comply.

The anticipated timeline appears to contemplate that exchange licensing applications might begin accepting in the fourth quarter of 2026 or early 2027, with licensing decisions extending through 2027. Stablecoin authorization would likely follow a similar timeline. ICO framework implementation would require detailed guidance on whitepaper standards and approval procedures. Policymakers are likely to avoid a “big bang” implementation where all requirements become effective simultaneously, recognizing that such an approach would create market disruption and compliance chaos.

For businesses, this timeline suggests that late 2026 and early-to-mid 2027 will be critical periods for preparing licensing applications, restructuring governance arrangements, and planning operational transitions.

Relationship to Broader Regulatory Initiatives

The Digital Asset Basic Act operates within a broader regulatory environment that includes VAUPA (already in effect), CARF (collection requirements now live), and proposed future initiatives like spot Bitcoin ETF approvals, Security Token Offering (STO) frameworks, and a Blockchain Basic Act. These initiatives are not entirely independent. The Digital Asset Basic Act sets foundational principles that subsequent initiatives will build upon.

For instance, STO frameworks will likely depend on digital asset definitions and licensing principles established by the Digital Asset Basic Act. Similarly, the Blockchain Basic Act, which has not yet entered formal legislative discussion, would provide more systematic legal recognition for blockchain technology infrastructure supporting regulated digital asset activities. We discuss these future regulatory horizons in (Series Part 6: Outlook).

Strategic Implications for Market Participants

For market participants, the Digital Asset Basic Act represents both opportunity and compliance obligation. It creates regulatory clarity and legitimacy for activities previously in legal gray zones. For established exchanges, it provides a pathway to formal authorization. For stablecoin projects, ICO platforms, and blockchain developers, it creates defined pathways to operate legally.

Simultaneously, it imposes obligations and compliance costs. Authorization requirements filter out marginal actors. Disclosure and governance standards impose operational demands. Unfair trading enforcement creates behavioral constraints. These reflect a mature regulatory regime treating digital assets as significant financial instruments.

The prudent strategy is to monitor regulatory developments closely, assess organizational readiness for licensing compliance, and engage proactively with regulators during consultation. The Digital Asset Basic Act reflects and enables the maturation of Korea’s crypto market.

Related reading: Korea’s Digital Asset Basic Act Delayed: How Stablecoin and STO Tracks Are Moving Separately — The latest status update on DABA’s legislative delay and how STO and stablecoin tracks are diverging.

About Cha & Kwon Law Offices: Specializing in cryptocurrency, blockchain, and virtual asset law, Cha & Kwon provides legal counsel to exchanges, fintech companies, blockchain developers, and institutional investors navigating Korea’s evolving regulatory environment. This article is Part 2 of our six-part series “Korea Crypto Regulation in 2026.”

Disclaimer: This article provides general legal information and should not be construed as specific legal advice for your situation. Please consult with qualified legal counsel regarding your particular circumstances.

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