South Korea is taking a major step toward legalizing stablecoins, with President Lee Jae-myung accelerating plans to establish a won-backed digital currency market. Just days after his June 3 election win, Lee’s Democratic Party introduced the Digital Asset Basic Act to support local stablecoin issuance and improve transparency in the crypto sector.

Under the proposed law, South Korean firms would be allowed to issue stablecoins if they hold at least 500 million won ($368,000) in equity capital. Issuers must also maintain reserves to guarantee redemptions and secure approval from the Financial Services Commission. The bill aims to boost competition while bringing regulatory clarity to a booming market where stablecoin transactions already reached $42 billion in Q1 2025 across five major exchanges.

President Lee, a vocal crypto supporter, is also pushing for the national pension fund to invest in crypto and for Bitcoin ETFs to be approved domestically. He argues a local stablecoin is essential to prevent capital outflows and support economic sovereignty.

However, not everyone is on board. The Bank of Korea is pushing back, warning that private stablecoins could disrupt monetary policy and asserting its authority to regulate any local currency-backed tokens. Memories of the 2022 collapse of Terra’s algorithmic stablecoin, co-founded by South Korean Do Kwon, still cast a shadow over the market.

Meanwhile, South Korean crypto stocks are soaring. KakaoPay shares surged up to 45% in the past week amid market excitement. Still, JPMorgan analysts caution that the stock rally may be premature, calling potential gains from Lee’s crypto reforms “fundamentally unjustifiable” until more concrete progress is made. The stablecoin debate now sits at the center of South Korea’s evolving digital asset strategy.