On October 8, 2024, South Korea's Ministry of Economy and Finance announced plans to apply foreign exchange rules to cross-border transactions involving dollar-pegged stablecoins. This move aims to enhance the soundness of stablecoin transactions, which are increasingly used for global transfers.
The Financial Services Commission (FSS) will prioritize discussions on stablecoins in the second legislative stage of the Virtual Asset User Protection Act. The FSS plans to consult with regulators from Japan and the European Union, although a specific timeline for these consultations has not been provided.
Initially, regulations will focus on issuing won-pegged stablecoins before addressing foreign currency stablecoins. This follows the European Union's Markets in Crypto-Assets Regulation and Japan's recent regulatory updates on stablecoins.
South Korea has also implemented stringent measures to protect crypto users, including requiring virtual asset service providers to maintain insurance against hacks and separate user assets from exchange tokens. Violators may face severe penalties, including jail time and fines up to five times the amount of illegally acquired profits.