Korea Ratings is developing a new framework to assess the risk levels of digital assets such as stablecoins. As cryptocurrencies expand into mainstream finance through payments and remittances, the firm plans to examine reserve assets, redemption capacity and even the stability of smart contracts.
Korea Ratings held its first Digital Finance Conference on the 21st at Conrad Seoul in Yeouido, where it outlined its approach to rating digital finance products. "For the market to grow sustainably, it needs transparency, accountability, stability and comparable risk information," said Patrick Yoon, president of Korea Ratings.
Stablecoins are the firm's main focus. Even when tokens are pegged to the same won or dollar value, risk can differ depending on the reserve assets the issuer holds and the redemption structure in place. The firm said assessments must cover not only the credit quality and market risk of reserve assets but also liquidity to meet large-scale redemption demands and internal controls at issuers and custodians.
Tokenized financial products may also fall under the ratings scope. Even if an issuer's ability to repay is unchanged, a blockchain failure or a smart contract error can delay principal and interest payments. If token holders' legal rights are unclear, that can also affect recovery of investments after a default. Korea Ratings identified platforms, smart contracts and external factors as additional risks to examine in digital finance products.
Calls are also growing to overhaul the tax framework as digital assets move into the regulated financial system. The People Power Party and the Digital Asset eXchange Alliance held a policy roundtable on improving the digital asset tax system at the National Assembly in Yeouido, Seoul, on the same day, arguing that institutional preparations are insufficient to implement the cryptocurrency tax as scheduled in January next year.
At issue are the calculation of acquisition cost and tax fairness across asset classes. For cryptocurrencies that have passed through overseas exchanges or personal wallets, purchase prices and transaction histories can be difficult to verify. Under the current system, 2.5 million won is deducted from annual cryptocurrency income and a 20% rate applies to the remainder. Including local income tax, the effective rate is 22%. By contrast, no tax is levied on capital gains for small investors trading domestically listed stocks on the exchange.
Chung Jom-sig, the People Power Party's floor leader, said the party needs to examine "whether the institutions and systems to tax digital assets fairly and accurately are sufficiently prepared." He added, "We will closely review which areas need to be re-examined, including the timing of taxation."
Lim Yi-ja, chair of the party's policy committee, said, "Taxation has been deferred three times, but concerns are still being raised on the ground that the institutions and systems needed to implement it are not sufficiently prepared." Lim added, "Taxation that is not ready should not be rushed into effect." Lim also stressed the need to clarify the timing and standards of taxation for newer transaction methods such as staking and decentralized finance, or DeFi.
