While regulatory authorities of developed countries were embarrassed by the recent economic confusion caused by the Terra known as stablecoin and seeking new regulatory scheme regarding stablecoin, Japan enacted the “Act to Partly Revise the Laws on...
While regulatory authorities of developed countries were embarrassed by the recent economic confusion caused by the Terra known as stablecoin and seeking new regulatory scheme regarding stablecoin, Japan enacted the “Act to Partly Revise the Laws on Fund Settlement to Promote Stable and Efficient Fund Settlement System.” in 2022. The Banking Act, the Fund Settlement Act, and the Crime Proceeds Transfer Prevention Act were revised by this Amendment Act. Electronic currency-like stablecoins are newly regulated as “electronic payment means” under the Fund Settlement Act, while crypto asset type stablecoins are regulated as “crypto assets” under the Funds Settlement Act. As the electronic currency-like stablecoins operated on the distributed ledger platform are expected to be serviced in a form where the ‘issuer’ of stablecoins and ‘intermediary’ to perform transfer and management of stablecoins are separated, a distinct regulatory regime is incorporated to fit for each business in the Funds Settlement Act. The Criminal Proceeds Transfer Prevention Act introduced travel rule to require financial intermediaries of electronic payment means transaction to pass on certain information relating to the trade to the next financial intermediaries during the transmittal of electronic payment means. In Korea, several written laws may play roles in the field of regulating stablecoins. Firstly, the revised Specific Financial Information Act aims at adopting travel rule. It seems that AML/CFT purposes related to stablecoins transfer are successfully accomplished by defining 'virtual assets' in the very comprehensive manner to include all kinds of crypto assets, but its sole regulatory target is virtual asset transaction service provider, leaving implicitly virtual asset issuer outside the regulation. Secondly, the Electronic Financial Transactions Act comes into examination as a sufficient regulatory regime over electronic money-like stablecoin. While it was analyzed whether electronic money-like stablecoins may fall under the electronic money or prepaid electronic payment means of the Electronic Financial Transactions Act, it was confirmed that the Electronic Financial Transactions Act cannot be an effective regulatory law regarding electronic money-like stablecoins because the core characteristics of electronic money-like stablecoins are inconsistent with the definition of electronic money or prepaid electronic payment means. Thirdly, the Virtual Asset User Protection Act also regulates only virtual asset transaction business to buy, sell or transfer virtual assets, and does not regulate virtual asset issuing, including electronic currency-like stablecoins issuing. Paradoxically. the first-step measure to solve the incompleteness of current legal scheme of Korea is to abandon braodly defining virtual asset but classify groups of stablecoins like Japan. The second-step measure is to introduce explicit definitions of each group of stablecoins, leading to separate regulation in its own sphere. The last measure is to distinguish the regulation of stablecoins issuer from the regulation of stablecoins transaction service provider, providing flexible regime in preparation for the future development of stablecoins.