Bank of Korea Cautiously Plans Won-Based Stablecoin Rollout

The Bank of Korea is adopting a cautious yet strategic approach to the rollout of stablecoins, with a focus on ensuring financial stability and minimizing risks to consumers and financial markets. Deputy Governor Ryoo Sangdai proposed that South Korea should initially allow only commercial banks to issue a won-based stablecoin, given their high level of regulation and the need for a safety net. This phased approach aims to mitigate potential risks associated with stablecoins, with eventual expansion to the non-banking sector under consideration.

Ryoo expressed concerns about the impact of a widely used stablecoin on capital flows and the country’s stance on foreign exchange liberalization. He also highlighted that the introduction of stablecoins could accelerate financial sector restructuring and potentially pave the way for narrow banking models. Governor Rhee Chang-yong shared similar concerns, noting that while he doesn’t oppose a won-backed stablecoin, managing its foreign exchange implications would be challenging.

In addition to the cautious approach to stablecoins, the Bank of Korea is advancing its central bank digital currency (CBDC) initiative as a direct countermeasure to private stablecoins. The current CBDC test phase is set to conclude on June 30, with future pilot phases dependent on inter-agency and bank consultations due to ongoing legal and policy uncertainties.

South Korea’s political landscape is also evolving around digital assets. The ruling Democratic Party proposed the Digital Asset Basic Act, which would allow firms with at least $368,000 in equity to issue stablecoins. This legislative move indicates a growing recognition of the potential role of stablecoins in the country’s financial ecosystem.

Globally, stablecoins are gaining traction. Visa recently partnered with African fintech firm Yellow Card Financial to push stablecoin adoption across the continent. In April, Russia’s finance ministry hinted at its own government-backed stablecoin plans, while major financial entities in Abu Dhabi revealed a collaborative project to develop a dirham-pegged stablecoin. These developments underscore the increasing interest in stablecoins as a means of facilitating cross-border transactions and enhancing financial inclusion.