South Korea Rushes to Finalize Crypto Framework Amid Record Stablecoin Outflows

South Korea is racing to finalize its crypto regulatory framework in Phase 2, which includes rules for stablecoins and crypto ETFs. The Financial Supervisory Service (FSC) has committed to completing legislation on virtual assets as soon as possible, particularly with regards to stablecoins.

Last month, Yoo Young-jun, the Director General of Digital Finance Policy at FSC, noted that they are currently consulting with relevant agencies to finalize legislation on stablecoins 'as soon as possible'. The urgency comes amid a reported record $346M stablecoin outflow from the country to overseas exchanges in June.

This outflow accounted for 78% of South Korean investors' net purchases of overseas stocks in June. Rep. Lee Jong-wook of the main opposition People Power Party called on the government to fast-track and update rules for the sector, citing the need for comprehensive examination of investor protection and supervisory frameworks.

Phase 2, or the Digital Asset Basic Act (VABA), focuses on stablecoins, tokenization, crypto ETFs, and corporate access to the sector. Notably, domestic firms have been under a 9-year ban from the market, but this will be lifted in Phase 2.