Kakao Eyes KRW Stablecoin on Kaia Amid Regulatory Uncertainty

Kakao, South Korea’s leading internet conglomerate, is preparing to launch a Korean won (KRW)-pegged stablecoin on the Kaia blockchain, following the recent registration of four KRW-related trademarks with the Korean Intellectual Property Office [1]. The trademarks, which include “KRWGlobal,” “KRWGL,” “KRWKaia,” and “KaKRW,” indicate a strategic move to integrate a digital version of the won into Kakao’s ecosystem, which currently serves over 49 million monthly active users in the country [1]. Kakao and its subsidiary Kakao Pay are part of Kaia’s governance council, which operates the public blockchain formed from the merger of Klaytn and Finschia [1].

Kaia is promoting the KRW-pegged token as a potential bridge to other stablecoins, particularly those backed by the U.S. dollar or Japanese yen, with the aim of expanding on-chain settlement and decentralized finance (DeFi) adoption [1]. According to Dr. Sangmin Seo, chairman of the Kaia DLT Foundation, the stablecoin will enable users to access DeFi protocols within Kakao’s mobile apps, potentially bringing decentralized financial services to a broader audience [1]. Kakao’s extensive user base, with 95% of South Koreans already using its services for messaging, payments, and online banking, positions the company as a key player in driving such adoption [1].

The development is unfolding against a backdrop of evolving regulatory discussions. Multiple bills and a government-led framework are under consideration, with the goal of setting rules for licensing, reserves, equity requirements, interest treatment, and the role of banks in stablecoin issuance [1]. Earlier in June, South Korea introduced a Digital Asset Basic Act that would allow qualified firms to issue won-pegged tokens, provided they meet minimum equity requirements [1]. The Bank of Korea, meanwhile, has suggested starting with bank-issued stablecoins and is examining deposit tokens on public blockchains [1].

In late June, the country’s ruling and opposition parties separately filed stablecoin bills, with a key point of contention being whether to allow interest on stablecoin deposits [1]. Both sides, however, agreed on the need for full-reserve backing and emergency powers for regulators [1]. Despite these efforts, the challenge for KRW stablecoins remains the lack of clear and compelling use cases compared to dollar-backed alternatives, according to Min Jung, a senior analyst at quantitative trading firm Presto [1]. He stressed that further research is necessary to identify and develop practical applications for won-pegged tokens [1].

South Korea’s strict capital controls, governed by the Foreign Exchange Transactions Act, also pose a significant limitation to the stablecoin’s potential in cross-border transactions [1]. These controls require specific procedures for overseas remittances and restrict offshore use, potentially reducing the token’s utility in international settings [1]. To address regulatory uncertainty, the government plans to require stablecoin firms to register with the central bank and submit monthly reports by the second half of 2025 [1].

According to Seo, the KRW stablecoin initiative is not just about digital currency issuance but also reflects a broader shift in the Korean market toward accepting digital asset-powered businesses [1]. However, the success of Kakao’s stablecoin will largely depend on the finalization of regulatory rules regarding licensing, reserve requirements, interest treatment, and the role of banks in the token’s issuance [1].

The current regulatory ambiguity means Kakao’s KRW stablecoin remains in the preparation stage, with any launch contingent on the outcome of ongoing legislative discussions [1]. The company’s ability to integrate the token across its ecosystem will be critical in demonstrating the practical value of KRW-based stablecoins in both domestic and international contexts [1].

Source: [1] Kakao Prepares Korean Won Stablecoin on Kaia as Lawmakers Weigh New Rules (https://decrypt.co/334666/kakao-korean-won-stablecoin-kaia-lawmakers-weigh-new-rules)