South Korea Launches Digital Asset Task Force for Crypto Laws

The staggering $40.6 billion in digital asset outflows during Q1 2025 has triggered alarm bells among South Korean policymakers. What makes this capital flight particularly concerning is that approximately half of this massive sum—roughly $20.3 billion—was transferred abroad using dollar-denominated stablecoins such as USDT and USDC. This pattern has raised fundamental questions about the nation’s financial control and monetary sovereignty, as these transactions effectively bypass traditional banking channels and regulatory oversight. The scale and velocity of these outflows have created a sense of urgency that has propelled digital asset regulation to the top of the legislative agenda.

Representative Lee Jung-moon, who heads the newly formed Digital Asset Task Force, articulated the government’s concern at the task force’s launch ceremony at the National Assembly. Lee emphasized that the world is currently in what he described as a “frenzy of blockchain and digital assets,” and that South Korea cannot afford to be “pushed along” by global developments. Instead, the Democratic Party aims to “lead the change” by establishing a proactive regulatory framework. This sentiment was echoed by Han Jung-ae, chair of the Democratic Party’s policy committee, who stated that “the need for legislation to cover issuance, distribution, and stablecoins of virtual assets is constantly being raised in the market.”

At the heart of the Democratic Party’s strategy is the creation of a won-based stablecoin policy designed to counter what Representative Lee Jung-moon characterized as the “U.S. dollar-based stablecoin and digital asset policy of competing countries.” This initiative represents a strategic effort to reduce dependence on dollar-pegged stablecoins and strengthen the Korean won’s position in the digital asset ecosystem. The timing is particularly significant as South Korea’s domestic stablecoin sector shows signs of maturation, with BDACS recently launching KRW1—the country’s first regulated won-backed stablecoin issued through Woori Bank.

Simultaneously, major Korean technology companies are advancing their own digital currency initiatives. Kakao, through its Kaia blockchain, is preparing to launch its own won-pegged token after registering the “KRWGlobal” and “KRWKaia” trademarks last month. These developments suggest that the private sector is already moving to create Korean won-denominated alternatives to dominant dollar-based stablecoins. The task force plans to coordinate with multiple government agencies including the Financial Services Commission, Financial Supervisory Service, and Bank of Korea to ensure that regulatory frameworks support rather than stifle this innovation.

According to Peter Chung, head of research at quantitative trading firm Presto Labs, the government’s “pro-growth” stance and willingness to be “open-minded and flexible” suggests that legislation will likely favor “innovation sandboxes” over heavier prudential regulation. When asked about the most urgent consumer protection mechanisms needed in forthcoming legislation, Chung identified “custody rules, disclosure requirements, and insurance mechanisms” as the top priorities. This balanced approach aims to protect consumers while fostering technological advancement.

The Democratic Party’s legislative push faces significant political hurdles, most notably competing stablecoin legislation filed by the ruling People Power Party in July. This competing proposal has created a parliamentary divide over key regulatory issues, setting the stage for potentially contentious negotiations. Despite these challenges, Representative Ahn Do-geol, who introduced the Democratic Party’s stablecoin proposal, expressed optimism that the task force has “formed a consensus” on the goal of passing digital asset-related legislation within the year through bipartisan agreement.

The task force plans to engage directly with crypto exchanges and fintech companies through legislative public hearings, ensuring that industry perspectives inform the final legislation. Han Jung-ae emphasized that “it is time to innovate technology in various fields related to virtual assets and prepare a reasonable system to keep pace with the flow of new financial markets.” This collaborative approach reflects recognition that effective regulation requires input from both public and private sectors.

As South Korea positions itself at the forefront of digital asset regulation, the success of this initiative will depend on navigating complex political dynamics while addressing the urgent concerns around capital flight and monetary sovereignty. The coming months will reveal whether the Democratic Party can achieve its ambitious goal of enacting comprehensive digital asset laws during the regular and year-end National Assembly sessions in 2025, potentially establishing South Korea as a global leader in balanced and innovative crypto regulation.