Bank of Korea Advocates Gradual Stablecoin Rollout Starting with Banks

The Bank of Korea, the country's central bank, has expressed a preference for a gradual and controlled rollout of stablecoins. Deputy Governor Ryoo Sangdai has advocated for banks to be the primary issuers of these digital assets, with a phased expansion to other sectors. This approach aims to ensure stability and regulatory compliance as the technology is integrated into the financial system.

The central bank's stance is driven by a desire to mitigate potential risks associated with stablecoins. By initially limiting issuance to regulated commercial banks, the Bank of Korea seeks to leverage the existing regulatory framework to oversee the introduction of these digital assets. This cautious approach is intended to prevent any adverse effects on the commercial banking sector and to ensure that stablecoins are issued responsibly.

Ryoo Sangdai emphasized that a won-denominated stablecoin should first be introduced at regulated commercial banks to ensure a safety net. He stated, “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.” This strategy aims to establish a safety net, considering the potential for market disruption or consumer harm.

However, the central bank still has some concerns about stablecoins. Ryoo Sangdai noted that a stablecoin rollout could accelerate capital outflows and “shift the fundamental stance we have maintained on foreign exchange liberalization, and the internationalization of the Korean won.” He also mentioned the need to consider the implications for financial sector restructuring, including the potential introduction of narrow banking.

Governor Rhee Chang-yong also expressed concerns about managing the foreign exchange of the token, although he did not oppose a won-based stablecoin. The central bank's cautious approach is part of a broader effort to integrate digital assets into the financial system while maintaining regulatory oversight.

The central bank has called for a gradual introduction of stablecoins, starting with regulated commercial banks, and has urged caution in expanding their use to other sectors. This phased approach aims to ensure that stablecoins are issued responsibly and that their introduction does not disrupt the existing financial ecosystem.

In addition to stablecoins, the central bank is also moving forward with a central bank digital currency (CBDC) as a “countermeasure to stablecoins.” Government agencies, including the Bank of Korea, the Financial Services Commission, and the Financial Supervisory Service, announced a CBDC test that will conclude on June 30. The timing for operating the second pilot test will be determined through consultation with banks, given the uncertainty regarding related laws and policies.

The Bank of Korea's approach to stablecoins is part of a global trend, with other countries also considering stablecoin options. This cautious and controlled rollout aims to ensure that stablecoins are integrated into the financial system in a way that minimizes risks and maximizes benefits for all stakeholders.