South Korea's central bank, the Bank of Korea (BOK), has outlined a cautious approach to introducing won-pegged stablecoins, emphasizing financial stability through a phased implementation strategy.
Senior Deputy Governor Ryu Sang-dong stated on Tuesday that commercial banks should be the first entities permitted to issue Korean won stablecoins, with non-bank institutions following later once sufficient safeguards and experience are established. This measured stance reflects Korea's commitment to balancing innovation with risk management in its burgeoning digital currency ecosystem.
Key Recommendations for Stablecoin Adoption
1. Bank-First Implementation Model
Ryu stressed that commercial banks—given their stringent regulatory oversight—are best positioned to pioneer stablecoin issuance. This "sandbox" approach would allow regulators to:
- Monitor impacts on monetary policy transmission
- Assess effects on payment settlement systems
- Develop contingency protocols before expanding access
2. Regulatory Safeguards
The BOK highlighted several non-negotiable requirements:
- Reserve backing: 1:1 asset collateralization with regular audits
- User protection: Segregated accounts and redemption guarantees
- Interoperability standards: Compatibility with existing financial infrastructure
3. Legislative Progress
The ruling Democratic Party has proposed draft legislation to:
✅ Formalize legal status for won-pegged stablecoins
✅ Establish issuer licensing frameworks
✅ Define supervisory responsibilities across agencies
Macroeconomic Context
While advancing digital currency initiatives, the BOK remains vigilant about traditional financial risks:
- Real estate: Rising housing prices in Greater Seoul area
- Household debt: Currently at 106% of GDP
- Monetary policy: Recent rate cut to 3.25% (neutral range midpoint)
CBDC and Market Reforms
Concurrent with stablecoin developments:
- CBDC Pilot: Second testing phase planned with commercial banks following initial BIS joint trial completion
- Market Internationalization: Extended trading hours and relaxed foreign investor rules to promote won's global use
FAQ: Korea's Stablecoin Roadmap
Q: Why start with banks for stablecoin issuance?
A: Banks have existing anti-money laundering (AML) systems, deposit insurance mechanisms, and proven risk management capabilities—critical for maintaining financial stability during initial adoption.
Q: When might non-bank institutions participate?
A: The BOK suggests 12-18 months after bank-led pilots demonstrate measurable success with controllable risk thresholds.
Q: How does this differ from USD stablecoins like USDT?
A: Won-pegged stablecoins would be directly redeemable at commercial banks, eliminating cross-border settlement delays and foreign exchange complications prevalent with dollar-based alternatives.
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Q: What safeguards prevent misuse?
A: Proposed legislation mandates real-time transaction monitoring, reserve attestations by certified auditors, and issuer capital requirements exceeding traditional e-money standards.
👉 Global stablecoin adoption trends
Q: How might this affect ordinary Koreans?
A: Potential benefits include faster cross-border remittances, reduced small-business payment processing fees, and enhanced competition in digital payment services.
Q: Are there plans to restrict foreign stablecoins?
A: While not banned, the BOK may impose disclosure requirements and usage limits to promote domestic alternatives once operational.
This approach positions South Korea to harness blockchain efficiencies while maintaining sovereign monetary control—a blueprint other central banks may emulate as digital assets reshape global finance.