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South Korea Makes Strides in Crypto Industry with New Digital Asset Act

South Korea passes “Digital Asset Basic Act” to regulate digital assets, while Shinhan Bank invests in custody and tokenization of cultural products, showcasing commitment to blockchain industry.

Key Points

  • South Korea passes “Digital Asset Basic Act” (DABA) to regulate digital assets, including capital reserve requirements for exchanges and a separate market for digital securities.
  • Shinhan Bank invests in Korea Digital Asset Custody Co. (KDAC), while Shinhan Securities establishes “STO Alliance” for security token development.
  • Financial Services Commission (FSC) and Bank of Korea (BoK) dispute regulatory supremacy in digital assets, with BoK demanding data access from service providers.

In a groundbreaking development for the crypto industry, South Korea has passed the “Digital Asset Basic Act” (DABA) as part of its efforts to balance blockchain development and investor protection. The Polymesh report titled “Regulatory Developments in Digital Assets” highlights this significant move by the country.

DABA’s Crypto Proposals

DABA introduces 17 legislative proposals that will shape the regulatory landscape for digital assets in South Korea. These proposals include capital reserve requirements for exchanges and the establishment of a separate market for digital securities. The Act is set to be implemented into law by June 2024.

Adding to the positive momentum, Shinhan Bank, the oldest bank in the nation, has made an equity investment in the Korea Digital Asset Custody Co. (KDAC). KDAC is a consortium focused on providing digital asset custody solutions. Shinhan Securities Co., Ltd, a subsidiary of Shinhan Financial Group, has also established the “STO Alliance”, a consultative body dedicated to the development of security tokens.

However, the journey towards digital asset regulation in South Korea has not been without its challenges. The Financial Services Commission (FSC) and the Bank of Korea (BoK) have been locked in a dispute over regulatory supremacy in the digital asset space. The BoK has demanded access to data from digital asset service providers, citing concerns over potential threats to financial stability.

South Korean Legislation on Crypto

Currently, South Korea’s only legislation specifically defining and regulating digital assets falls under an amendment to the Anti-Money Laundering Act. This amendment includes digital assets within the scope of the Act on Reporting and Use of Specified Financial Information.

In an exciting fusion of culture and technology, South Korea plans to leverage blockchain to expand its popular culture, widely known as “K-culture”. The city of Busan has announced plans to launch a decentralized digital commodities exchange that will focus on tokenized products showcasing the city’s cultural strengths.

Meanwhile, Cube Entertainment, the fifth-largest K-pop company, has made a foray into the metaverse through a partnership with Animoca Brand’s gaming subsidiary, The Sandbox. Cube plans to create a “K-culture complex” filled with Korean cultural content on virtual land within The Sandbox.

End Note

Furthermore, global digital asset custodian BDACS has unveiled plans to tokenize Korean culture on the Polymesh blockchain. This project aims to provide new avenues for engagement for fans, artists, producers, and investors.

With these developments, South Korea is setting a strong precedent in embracing and regulating digital assets. As the country moves forward, it seeks to foster innovation while ensuring consumer protection and financial stability in the crypto industry.