[Virtual Asset Industry in Crisis ③] Experts Advise: "Support First, Regulate Later with Regulatory Sandbox Needed"

Delay in Second-Phase Legislation Due to Inter-Agency Disagreements
"Falling Behind in the Global Race"
"Practical Policy Levers Needed, Such as Regulatory Sandbox Introduction"

"Unlike major global countries that are rapidly expanding their businesses based on institutionalization, Korea remains at a standstill due to policy uncertainty, with business expansion, institutional investor entry, and the introduction of innovative services all halted," said Hwang Seokjin, Professor at Dongguk University Graduate School of International Information Security.

The United States, European Union (EU), Japan, and Hong Kong have already designated virtual assets as future financial infrastructure and are pushing ahead with both institutionalization and commercialization. However, only Korea is making no progress. With ongoing policy uncertainty, business expansion, institutional investor entry, and the introduction of innovative services have all come to a halt. Voices from both industry and academia are growing louder, calling for the swift passage of the second-stage legislation and the introduction of a sandbox to immediately revitalize the industry.

The biggest issue in Korea is not the presence of excessive regulation, but rather the lack of regulation, which makes business operations impossible. Without issuance standards, all project issuances have moved overseas. Most new businesses, such as stablecoins, custody services, and real-world asset (RWA) tokenization, are difficult to pursue due to legal and institutional gaps. As a result, the industry structure has naturally become entrenched around exchanges.

Professor Hwang pointed out, "Due to delays in the second-stage legislation and debates over stablecoin issuers, businesses are unable to develop mid- to long-term strategies or new ventures, and institutional investors and traditional financial institutions are unable to enter the market in earnest due to compliance risks. Korea lacks a 'growth strategy' following virtual asset user protection, which is leading to a structural crisis as the country falls behind in the global race for speed."

Moon Chulwoo, Professor at Sungkyunkwan University Business School, also stated, "The domestic market is shrinking due to regulation, and the outflow to overseas virtual asset exchanges is accelerating. Without the prompt introduction of domestic regulatory easing and activation policies, Korea risks being left out of the expanding global market and becoming an outsider."

The global landscape has already entered a phase of institutional competition. In the United States, the listing of Bitcoin exchange-traded funds (ETFs), the passage of the GENIUS Act, and the upcoming passage of the U.S. Digital Asset Market Clarity Act (CLARITY Act) are all underway. The EU, through the Markets in Crypto-Assets Regulation (MiCA), has integrated the entire process of issuance, custody, and trading under a licensing system. Singapore and Switzerland are accelerating the attraction of Web3 companies based on licensing. In Japan, fintech company JPYC has already issued the stablecoin JPYC, and in Hong Kong, as of the end of September this year, 36 institutions have submitted stablecoin license applications.

The core of the second-stage virtual asset legislation is to formally incorporate the industry into the institutional framework for the first time. It will establish the foundation for a Korean-style payment infrastructure by defining licensing for stablecoin issuers, management of reserve assets, and guarantees of redemption rights. In addition, it will subdivide virtual asset business operators into advisory, evaluation, and custody services. The legislation is also expected to introduce listing regulations and disclosure systems to enhance project transparency.

Whether the bill passes will be a pivotal moment that determines whether Korea will fall behind or rejoin the global digital finance competition, going beyond merely introducing new regulations. However, disagreements among government authorities have stalled the bill. While the Financial Services Commission has expressed its intention to submit the second-stage virtual asset bill, including regulations on won-denominated stablecoins, within the year, submission has been delayed due to differences with the Bank of Korea over issues such as issuance authority and supervisory powers.

Jung Gutae, CEO of Infinitblock, stated, "Stablecoins are not just 'coins' but are essentially digital currencies, and they are connected to the entire system, including reserve assets, payments, and financial stability. However, the government's and bureaucracy's tendency to excessively restrict issuers to banks is problematic." He continued, "What is needed now is not an attitude of risk aversion, but policy leadership that designs clear eligibility requirements and role distribution. The longer the delay, the greater the risk of losing leadership in future financial infrastructure."

Professor Hwang said, "Excessive caution can actually hinder opportunities for innovation and growth. While the government's focus on stability is understandable, it is difficult to avoid criticism that it has lost balance by failing to sufficiently consider innovation and growth."

Professor Moon also pointed out, "There is no country in the world where stablecoin issuance is institutionalized around banks while tech companies are relegated to a secondary role or implementation. The idea of leading innovation through government-controlled finance is highly concerning."

Experts suggest that, in addition to legislation, support measures such as sandboxes are also necessary to foster the industry. Even if legislation is passed, it will take another year for detailed systems such as enforcement ordinances and supervisory regulations to be established, so it is crucial to move quickly to revitalize the industry.

Professor Hwang explained, "Separate from the passage of the bill, the government needs to implement policy mechanisms that allow for 'support first, regulate later' approaches. Priority areas for review in a sandbox should include pilot stablecoin issuance and payment tests, RWA demonstrations, and expansion of custody and institutional investor participation." He added, "By doing so, we can compare and verify the stability of issuer models and enable tokenization experiments in line with the global financial market, thereby securing the information needed for future institutional design."

CEO Jung emphasized, "We need to provide a temporary safe zone for new industries and offer a clear sandbox track. Policy levers that can be implemented faster than legislation should be actively utilized."

This content was produced with the assistance of AI translation services.