- South Korea plans a gradual stablecoin rollout, starting with regulated commercial banks to ensure financial safety and control.
- The Bank of Korea continues its central bank digital currency trials as a strategic response to the rise of stablecoins.
South Korea is taking a cautious approach to developing stablecoins, focusing on regulation and financial stability. The Bank of Korea (BOK) calls for commercial banks to lead the early issuance phase to minimize potential risks and lay the groundwork for a safer digital currency system.
Banks to Lead Initial Stablecoin Issuance
The Bank of Korea (BOK) has clarified that banks should take the lead in issuing stablecoins in the country. Deputy Governor Ryoo Sang-dai commented during a recent press briefing, and a local news platform reported on the updates.
He explained that commercial banks should first introduce stablecoins backed by the Korean won. According to Ryoo, the aim is to ensure a safety net that protects the financial system and consumers alike.
Additionally, he stressed that banks, which already operate under tight financial regulations, are in the best position to manage the initial risks involved with stablecoin issuance. He said the rollout should expand to other sectors only after a stable structure is formed.
According to him, it would be desirable to initially allow stablecoin issuance primarily through banks, which are subject to higher levels of financial regulation, and gradually expand it to the non-banking sector.
The deputy governor added that introducing a won-based stablecoin too quickly or through unregulated channels could increase the risk of market disruption. He also raised concerns about its possible effects on South Korea’s foreign exchange stance and capital flows.
While Ryoo expressed concern that a stablecoin rollout could impact foreign exchange policy and trigger capital outflows, other countries and businesses are moving ahead. For example, as mentioned in our previous news brief, JD.com in China is preparing to launch a stablecoin initiative to cut cross-border payment costs by up to 90%.
Additionally, CNF reported that Mitsubishi UFJ Trust and Banking Corporation (MUFG) is preparing to make history in Japan’s digital finance world. The country’s largest trust bank is now in the final stage before launching the first fully compliant stablecoin.
Stablecoins Prompt Fresh Policy Discussions
It is worth mentioning that while the central bank is not entirely against the idea of stablecoins, it remains cautious. Governor Rhee Chang-yong recently said that he is not opposed to a won-denominated stablecoin. However, managing its impact on foreign exchange remains a challenge.
The Bank of Korea is also reviewing how stablecoins could affect broader financial restructuring, including the possible introduction of narrow banking. The BOK will keep testing its digital currency to keep up with private efforts.
Regarding the above, Ryoo referred to the CBDC as a countermeasure to stablecoins. Tests involving key financial institutions are scheduled to wrap up by the end of June.
Meanwhile, the government is making efforts to formalise the digital asset space. A proposed Digital Asset Basic Act would allow firms with at least $368,000 in equity to issue stablecoins, signaling legislative interest in digital currency innovation.
In another major move toward global stablecoin adoption, CNF reported that the Australian stablecoin AUDD has launched on the Hedera network to support payment innovation in the Asia-Pacific region. Also, as mentioned in our previous news brief, Jack Ma-owned Chinese financial giant ‘Ant Financial’ has reportedly applied for stablecoin issuer licenses in Hong Kong and Singapore.
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