Kim & Chang Lawyer Says Korea Stablecoin Bill Needs Clear AML Rules

Kim & Chang lawyer Jung Young-ki said South Korea's stablecoin legislation must designate issuers as entities subject to anti-money laundering obligations, arguing that clear rules matter more than lenient ones for the proposed Digital Asset Basic Act to work.

Jung spoke on November 10 at a seminar titled "Tasks After the Digital Asset Basic Act," held at the Korea Financial Investment Association's Financial Investment Education Institute. He identified four legislative tasks: AML obligations for issuers, a legal basis for asset freezing, consistency with the Foreign Exchange Transactions Act, and a public-private cooperation framework.

What does the lawyer want issuers to do?

At the approval stage for stablecoin issuance, Jung said, regulators should verify whether issuers have anti-money laundering capabilities in place. That verification should cover three specific items:

• a compliance officer;
• internal control systems;
• independent third-party audits.

"Stablecoins offer high price stability, ample liquidity and no border constraints," Jung said, adding that the same characteristics make them vulnerable to misuse for money laundering.

He drew a line at the distribution stage, however. Exchanges and other distribution participants already carry their own AML obligations, he noted, and issuers should not be saddled with excessive responsibility for that layer of the market. Responsibilities between issuers and distribution participants should be clearly divided.

Why does asset freezing need a legal basis?

Jung argued lawmakers must establish statutory conditions and procedures for freezing, blocking and burning stablecoin assets. "If an issuer freezes assets at its own discretion, that could lead to legal disputes," he said. "The conditions and procedures for freezing, blocking and burning should be clearly defined."

That position addresses an operational gap that has already surfaced elsewhere: without statutory authority, issuers face litigation risk when they act against wallets, and inaction leaves enforcement agencies without a tool.

How would public-private cooperation work?

Jung proposed a two-way information-sharing channel between the state and issuers. "If the government identifies wallet addresses linked to terrorist financing, it should share them with issuers, and issuers should also share information on suspicious transactions with state agencies," he said.

He also flagged consistency with the Foreign Exchange Transactions Act as a prerequisite, since stablecoin transfers across borders can replicate functions of cross-border payments that the act already regulates.

"It is important to accurately diagnose the risks posed by stablecoins and apply regulations that match those risks," Jung said.

What comes next for the Digital Asset Basic Act?

Jung's sharpest message concerned regulatory certainty over regulatory severity. "Clear rules are better than unclear ones, even if they are strict," he said. "If regulations are vague, businesses are left in a position where it is difficult to respond either aggressively or loosely."

His remarks land as South Korea's National Assembly continues to draft the Digital Asset Basic Act, the bill that would set the licensing and supervisory framework for won-backed and foreign stablecoins circulating in the domestic market. Whether lawmakers write issuer-level AML duties and statutory freeze procedures into the text will determine the compliance burden that exchanges and prospective Korean issuers face once the bill passes.