"Industry before tax": Push for the Digital Asset Basic Act

He serves on the Political Affairs Committee, handling finance and fair-trade issues, and is the senior vice chair for the economy at the party's policy committee.

Several other lawmakers have since joined and are co-sponsoring it.

The Basic Act includes a provision introducing a market-maker system to the crypto market, similar to the professional liquidity providers in stock markets. In stock markets, market makers narrow order-book spreads so traders can transact at better prices.

The crypto market currently lacks a legal basis defining this role, making it difficult for exchanges to adopt market makers. However, because such activity could be seen as price manipulation, there is a need to define it clearly in law.

Rep. Min has called for postponing the government's planned crypto tax starting January 1, 2027, until after the Basic Act passes. His formal proposal to postpone the tax as a ruling-party lawmaker is a notable move.

The government still maintains its position on taxation, so the Political Affairs Committee now needs to reconcile the Basic Act and the tax timing.

Domestic trading data can be obtained, but there is currently no way to obtain trading data from overseas exchanges. If taxation begins January 1, 2027, domestic trades would be taxed while overseas trades would not.

Investors would then have every reason to move to overseas exchanges. The concern is that domestic investors and companies dealing in digital assets could leave, shrinking the domestic market.

Rep. Min also pointed out that foreign residents could enter the domestic market, and the current tax design cannot attract them.

Rep. Min said it would set out tasks to be completed within 6 months, within 12 months, and 18 months later.

The plan would set completion deadlines for each task at each stage and report progress to the National Assembly. Tasks are expected to include building an overseas transaction analysis system and introducing a loss carryforward system.

This is not simply delaying the tax, but setting a specific period for putting in place the systems the industry needs.

Under the principle that tax should be paid where income arises, a tax system that is unfair or opaque will provoke investor discontent. Rep. Min warned that such unfairness and opacity could ultimately destroy the market and the industry as a whole.

He therefore expressed the view that the timing and method of tax policy should be discussed together with the aim of keeping the industry alive.

Current law uses the term "virtual assets." The term itself entrenches negative perceptions. A bigger problem is that current law focuses only on user protection and anti-money-laundering.

The Basic Act seeks to change the term to "digital assets" and to comprehensively regulate issuers, distribution systems, oversight, and investor protection. The aim is to create a legal framework covering the entire industry.

This means a situation in which all transactions could be made through dollar-based stablecoins using only a smartphone.

In that case, won-based stablecoins in Korea might not only be impossible to issue, but even if issued, would lack a base to be used. If dollar stablecoins take the market first, there would be no room for won stablecoins.

It can be compared to the shift from horse carriages to automobiles: a country skilled at making carriages that neglected car development lost its competitiveness. Likewise, if Korea neglects digital finance, it will inevitably fall behind in history.

Postponing digital assets such as stablecoins could lead to an outcome of "dying in the old game." The concern is that if Korea fails to ride the wave of digital finance sweeping the world "like a tsunami," it will fall behind in the financial system itself.

He therefore argues that Korea must become a leading nation in the digital finance era through rapid institutionalization.

Under the current Income Tax Act, spot investment in virtual assets on domestic exchanges is taxable. However, the legal basis for taxing perpetual futures trading on overseas exchanges such as Binance is unclear, so in practice it is not taxed.

Government ministries have also passed responsibility back and forth. The Ministry of Economy and Finance says the Financial Services Commission has not finalized the matter, while the Financial Services Commission says tax matters fall under the Ministry of Economy and Finance. This reveals how little understanding and policy momentum the government ministries have on digital assets.

A won-based stablecoin is not merely a financial issue but a matter of building new infrastructure. Multiple ministries are involved, including finance, economy, taxation, trade, and small business.

To reflect this, the Basic Act includes a provision establishing a presidential committee on virtual and digital assets. Just as many new industries emerged on the internet when it appeared, he believes stablecoins are likely to become the foundation for new industries.

He therefore argues that a control tower spanning all ministries is needed.

Financial regulators and the Bank of Korea favor allowing only bank-led consortia in which banks hold more than 50% of the equity. By contrast, lawmakers leading the Basic Act argue for a market where consortia of banks, fintech firms, and various combinations compete.

The lawmakers argue that stablecoin stability depends on how reserves are held and monitored, rather than on who the issuer is. They warn that if banks monopolize the field, it would protect existing financial vested interests and make true competition and innovation impossible.

Currently there are only 19 domestic banks, and only 5 are commercial banks. Relying solely on them for stablecoin business would make innovation hard to expect. Moreover, domestic banks earn profits on the scale of 32 trillion won per half-year, so they may have weak incentives to aggressively enter new business areas.

Bank-centered entry regulation amounts to recognizing the vested interests of existing financial institutions. Once those interests are recognized, new entrants are blocked, and as a result competition and innovation do not emerge.

Instead, the approach should shift toward conduct regulation. Whoever runs the business would be required to strictly follow conduct standards such as reserve management, monitoring systems, and investor protection. That, he argues, would secure stability while promoting competition.

He takes the position that a market where bank-centered, fintech-centered, and various combined consortia compete would better serve the public.

Some have proposed limiting major shareholders' stakes in the issuance of won stablecoins. In response, Rep. Park Ji-won argued that a limit only makes sense once the market has grown large enough to have a pie to divide.

The current priority is to rapidly grow the domestic digital asset market. The reasoning is that it is sensible to apply various standards once the market base has expanded sufficiently.

Not all 300 National Assembly members need to understand digital assets and stablecoins. In the lawmaking process, the relevant standing committee studies the matter intensively.

Many lawmakers on the Political Affairs Committee have submitted bills related to the Digital Asset Basic Act. Referring to how the US handled digital asset legislation, and to actual stablecoin and digital asset use cases, lawmakers' understanding has reportedly risen.

Rep. Min said the policy understanding is already very high at key levels, including the presidential office, the government, party leadership, the party policy committee, and the Political Affairs Committee.

About 13 million people in Korea already hold digital asset wallets. Citizens are already actively using digital assets.

Rep. Min said he can no longer ask these citizens to simply "wait." He takes the position that rapid institutionalization is the National Assembly's responsibility. Many companies are also cautious, worried about running into legal trouble while doing business.

Because the bill subcommittee proceedings are closed, a public hearing is planned to give citizens an opportunity to take part in the legislative process.