Attention is turning to whether the South Korean government can quickly establish a regulatory framework for cross-border transactions using stablecoins. But the Digital Asset Framework Act will likely need to be enacted first for related rules to be put in place.

Son Sun-young, director of foreign exchange analysis at the Ministry of Economy and Finance, said at a seminar titled "The Stablecoin Era and the Future of Cross-Border Payments in South Korea" at Yeouido Post Tower on Nov. 11 that rules on stablecoin circulation would be prepared once the Digital Asset Framework Act is enacted. The ministry then plans to reflect those provisions in the Foreign Exchange Transactions Act.

The Digital Asset Framework Act, which is under discussion in the National Assembly, is set to include provisions on qualification requirements for stablecoin issuers, reserve asset management and user protection. Son said that once detailed rules related to stablecoin issuance are in place, matters involving cross-border transactions will be governed under the Foreign Exchange Transactions Act.

More specifically, the ministry plans to review in an amendment to the Foreign Exchange Transactions Act whether to include stablecoins in the existing category of external payment instruments or regulate them separately. It also plans to discuss the extent to which stablecoins should be allowed in current-account and capital-account transactions, as well as who should conduct transaction documentation and verification procedures.

Son added that stablecoins have significant potential for overseas remittances, business-to-business payments and real-time settlement. He said the ministry would push ahead with formalizing the system after sufficiently reviewing services being prepared across industries, specific business models and market demand, while also gathering opinions.