Regulatory Tensions Rise as South Korea's KRW1 Stablecoin Enters Arc's Global Network

Circle CEO Jeremy Allaire has positioned the company's newly launched Arc blockchain as "an economic operating system for the internet," a platform designed to streamline global financial infrastructure through predictable fees, sub-second transaction finality, and support for fiat-pegged stablecoins. This vision is gaining traction, as South Korean crypto custodian BDACS announced plans to deploy KRW1, a won-backed stablecoin, on Arc's testnet, marking a significant step in integrating Korean financial innovation into the global stablecoin ecosystem, according to a Coindesk report.

The Arc testnet, launched on October 28, 2025, has already attracted over 100 institutions, including BlackRock, Visa, Goldman Sachs, and State Street, underscoring its potential to redefine cross-border payments and capital markets. By using USDC as its native gas token, Arc offers predictable dollar-based fees and deterministic finality, addressing pain points associated with legacy blockchain networks. Allaire emphasized that Arc's architecture is tailored for enterprises seeking to tokenize assets, execute lending agreements, and facilitate foreign exchange transactions in a secure, scalable environment, in a Circle press release.

BDACS's KRW1 stablecoin, pegged 1:1 to the South Korean won, will serve as a bridge for Korean firms to access global stablecoin networks. The Busan-based custodian signed a memorandum of understanding (MOU) with Circle to develop and deploy KRW1 on Arc, a move described by BDACS CEO Ryu Hong-yeol as "a meaningful step forward for Korea's innovation to reach the global stage." The stablecoin's trademark was registered in December 2023, laying the groundwork for its rollout, Coinotag reported in its coverage of the announcement.

Arc's adoption is being driven by its ability to accommodate both regulated and emerging markets. Regional stablecoin issuers from Japan, Brazil, Mexico, and the Philippines are already testing their tokens on the platform, with KRW1 joining this list. This aligns with Allaire's assertion that Arc is designed to connect "every local market to the global economy," a claim supported by its integration with major financial institutions and fintechs, as detailed in the Circle press release.

However, regulatory debates persist. Sangmin Seo, chair of the Kaia DLT Foundation, criticized the Bank of Korea's (BOK) proposal to restrict won-backed stablecoin issuance to banks, calling it "illogical." Seo advocated for clear rules applicable to all potential issuers, whether banking or non-banking, to foster innovation while managing risks, according to the Coinotag coverage. The BOK, meanwhile, argues that bank-led issuance would minimize anti-money laundering (AML) concerns under existing regulatory frameworks.

Market data highlights Arc's growing influence: stablecoins now command a $170 billion market cap, with USDC alone surpassing $72 billion in circulation. Circle's strategic alliances, including partnerships with ClearBank for European stablecoin payments and Hyperliquid for DeFi interoperability, further reinforce its ecosystem, per an FXLeaders report. Despite these advancements, CRCL stock experienced a 17% decline in early November, reflecting investor profit-taking following a post-IPO rally.

Allaire envisions Arc evolving into a "shared, neutral layer of economic infrastructure" governed by a distributed network of participants. While Circle currently stewards the platform, the long-term goal is to transition to community-driven governance, ensuring Arc remains open and adaptable to global financial needs, the company said in its press release.

As KRW1's deployment progresses, stakeholders will closely monitor how regulatory frameworks and market dynamics shape the future of stablecoin adoption. For now, Arc's testnet momentum—bolstered by institutional participation and strategic partnerships—positions it as a pivotal player in the next phase of onchain finance.

---