South Korea's government and central bank plan to amend the country's Foreign Exchange Transactions Act in 2026 to regulate stablecoins as payment instruments, as authorities seek tighter oversight of cross-border digital asset transactions.

The Bank of Korea said it intends to work with the government on the legislation and to develop a monitoring framework for virtual asset transactions, including reporting through the country's foreign exchange information network.

The Foreign Exchange Transactions Act serves as South Korea's primary legal framework governing cross-border capital flows. Stablecoins are digital tokens designed to maintain a fixed value against a reference asset, most commonly the US dollar, and have become widely used in trading and cross-border payments. Bringing them under the foreign exchange regime would subject such transactions to the same reporting and oversight channels that apply to conventional foreign currency movements. In, that means moving stablecoins across borders would be reported and monitored through the same channels as conventional currency transactions.

The measures are designed to address potential gaps in oversight, as digital assets enable transfers that bypass traditional financial institutions. The central bank has also raised concerns about the use of cryptocurrency mixers and unhosted wallets, which can make transactions harder to trace and increase the risk of illicit financial activity.

Separately, South Korea is developing the Digital Asset Basic Act, a broader regulatory framework for the cryptocurrency industry that would include licensing requirements for exchanges and rules governing stablecoin issuance. Financial Services Commission Chairman Lee Eog-weon said discussions on the legislation were nearing completion. The two tracks complement each other: the foreign exchange amendment governs cross-border flows, while the Basic Act shapes the domestic market itself, from exchange licensing to stablecoin issuance rules.

The Digital Asset Basic Act would build on the Virtual Asset User Protection Act, which took effect in July 2024 and focused on investor protections and fair trading practices in the virtual asset market. The proposed foreign exchange law changes remain under development, with details on their scope and implementation yet to be finalized. Key developments to watch include the 2026 legislative timeline, how the final scope of the reporting requirements takes shape, and whether the Basic Act discussions conclude as the Financial Services Commission chairman indicated.

Source: BitcoinKE