KakaoBank Defies Regulatory Gridlock to Launch Stablecoin Amid South Korea's Digital Finance Race

KakaoBank, South Korea's leading digital bank, has accelerated its development of a Korean won-pegged stablecoin, "Kakao Coin," as part of a broader push to integrate blockchain technology into its financial services. The initiative, which follows internal and legal approvals, underscores the company's ambition to position itself at the forefront of the country's evolving stablecoin landscape. Kakao's founder, Kim Beom-soo, is reportedly spearheading the project, leveraging the firm's vast user base across messaging, banking, and payments to drive adoption. The bank has also begun hiring blockchain experts, including backend developers with smart contract expertise, to build the infrastructure necessary for stablecoin issuance and security token offerings (STOs).

The move aligns with South Korea's growing interest in digital assets, as stablecoins accounted for 30% of all on-chain crypto transactions globally in 2025. However, regulatory uncertainty remains a key challenge. The Bank of Korea (BOK) has advocated for banks to hold majority control in stablecoin issuers to mitigate systemic risks, while tech firms and the Financial Services Commission (FSC) push for broader participation from non-bank entities. This regulatory standoff has delayed the implementation of a stablecoin framework, originally expected by late 2025. Despite the ambiguity, KakaoBank is proceeding with its plans, reflecting the urgency of firms to secure a first-mover advantage in the market.

The Naver-Dunamu merger, finalized in November 2025, further intensifies competition in the sector. Naver Financial's acquisition of Dunamu, operator of Upbit, South Korea's largest crypto exchange, creates a consolidated entity with significant payment infrastructure and regulatory experience. The $10.3 billion all-stock deal, which reduces Naver's ownership stake to 17%, is expected to enable rapid deployment of stablecoin services across Naver's platforms. Analysts suggest the merger could set a precedent for how stablecoins are issued and distributed in the country, particularly as the combined entity explores a U.S. listing.

KakaoBank's strategy also includes exploring STOs, partnering with Korea Investment & Securities and Lucent Block to develop blockchain-based financial products. These efforts align with South Korea's legislative amendments, which aim to establish an STO market by mid-2026, potentially valued at $287 billion by 2030. Meanwhile, Naver-Dunamu's expansion into stablecoins highlights the convergence of traditional finance and crypto, as the merged firm aims to leverage its 80 trillion won in annual payment volume to facilitate instant stablecoin transactions.

Regulatory clarity remains the critical hurdle. While lawmakers have introduced multiple stablecoin bills, disputes over ownership structures, reserve requirements, and interest payments persist. The BOK's insistence on a 51% bank ownership stake in issuers contrasts with the FSC's more open approach, creating a fragmented policy environment. KakaoBank's advance into the market, despite these uncertainties, signals a broader trend of financial institutions prioritizing innovation over immediate regulatory compliance, a strategy that could shape South Korea's digital economy in the coming years.