Outline of Basic Act on Virtual Assets: Bank-led stablecoins and no-fault liability under review

[The Financial News] Financial regulators have begun full-fledged discussions on including a no-fault liability regime and bank-centered standards for issuing stablecoins in the "General Act on Digital Assets" (the second-phase legislation on virtual assets).
Vice Chair Kwon Dae-young of the Financial Services Commission (photo) on the 4th chaired this year’s first meeting of the Virtual Asset Committee at Government Complex Seoul, where officials reviewed last month’s "erroneous Bitcoin payout incident" at Bithumb and discussed directions for introducing institutional safeguards going forward. The Financial Services Commission (FSC) plans to accelerate the legislative process by improving the self-regulatory framework of the Digital Asset eXchange Alliance (DAXA) and coordinating with the ruling party and government.
The Virtual Asset Committee first shared the interim findings presented by the Financial Supervisory Service (FSS) on the erroneous virtual asset payouts that occurred on the 6th of last month. An emergency response team composed of the FSC, the Financial Intelligence Unit (FIU), the FSS, and DAXA agreed to guide Bithumb so that affected users receive sufficient compensation, while initially strengthening self-regulation to improve exchanges’ internal controls and risk management systems.
Vice Chair Kwon stressed, "Exchanges must build internal control and risk management systems through improvements to DAXA’s self-regulatory framework," adding, "Fundamentally, we need to secure institutional effectiveness by enacting the General Act on Digital Assets."
The key focus of the meeting was the government’s review draft of the General Act on Digital Assets. The committee examined changing the current legal term "virtual assets" used in the Act on the Protection of Virtual Asset Users to align better with global standards and terminology.
In particular, members engaged in in-depth discussions on imposing no-fault liability for damages on exchanges to bolster market trust. Under such a regime, exchanges would be required to compensate users for losses arising from system failures, hacking, or similar incidents regardless of whether the exchange was at fault. The committee also discussed codifying internal control standards and IT and cybersecurity requirements for exchanges in law.
On stablecoins, the committee considered a structure in which banks hold at least a 50% plus one share stake to ensure market stability. This is seen as an effort to build the stablecoin ecosystem around trusted financial institutions and thereby reduce systemic risk.
The need for ownership-dispersion rules for virtual asset exchanges was also raised. To prevent privatization by controlling shareholders and to establish transparent governance, it is highly likely that fit-and-proper tests and ownership limits similar to those applied to financial companies will be introduced. Specific methods and timelines will be decided later through consultations between the ruling party and the government.

elikim@fnnews.com Kim Mi-hee Reporter