South Korea Aims to Curb Capital Flight with Won-Based Stablecoin Regulations

South Korea’s ruling Democratic Party has launched a Digital Asset Task Force to draft comprehensive legislation governing stablecoins and virtual assets, aiming to address growing concerns over capital flight and financial stability. The initiative, announced in September 2025, seeks to enact laws during the year’s regular and year-end National Assembly sessions, with a focus on regulating the issuance, distribution, and custody of digital assets. The task force, led by Rep. Lee Jung-moon, emphasizes the need for South Korea to “lead the change” in a global “frenzy of blockchain and digital assets” rather than lag behind South Korea's Ruling Party Task Force Aims at Crypto, Stablecoin Oversight^[1]. The urgency is underscored by data showing $40.6 billion in digital assets transferred abroad in Q1 2025, with half flowing through stablecoins like USDT and USDC, prompting alarms over monetary sovereignty South Korea's Ruling Party Task Force Aims at Crypto, Stablecoin Oversight^[1].

The task force’s strategy includes establishing a won-based stablecoin policy to counter U.S. dollar-dominated stablecoins and collaborating with agencies such as the Financial Services Commission (FSC), Financial Supervisory Service, and Bank of Korea. Public hearings with crypto exchanges and fintech companies will be held to ensure stakeholder input South Korea's Ruling Party Task Force Aims at Crypto, Stablecoin Oversight^[1]. The Democratic Party faces competition from the People Power Party, which introduced its own stablecoin legislation in July, creating a parliamentary divide on regulatory priorities. Bipartisan consensus, however, has emerged around passing legislation by year’s end, though negotiations remain contentious South Korea's Ruling Party Task Force Aims at Crypto, Stablecoin Oversight^[1].

South Korea’s stablecoin sector is gaining momentum, with regulated won-backed tokens like KRW1 (launched by BDACS via Woori Bank) and Kakao’s KRWGlobal/KRWKaia trademarks signaling a shift toward localized digital assets. Peter Chung of Presto Labs highlighted the need for consumer protection measures, including custody rules, disclosure requirements, and insurance mechanisms, as key priorities for the legislation South Korea's Ruling Party Task Force Aims at Crypto, Stablecoin Oversight^[1]. Analysts anticipate a regulatory framework favoring “innovation sandboxes” over heavy prudential controls, aligning with the government’s pro-growth stance South Korea's Ruling Party Task Force Aims at Crypto, Stablecoin Oversight^[1].

The Democratic Party’s proposal includes a Digital Asset Basic Act, submitted in June 2025, which mandates licensing for won-backed stablecoin issuers and imposes 500 million won capital requirements. The law broadens the definition of digital assets, granting the FSC investigative and penalty powers to combat unfair trading South Korea Unveils Comprehensive Digital Asset Regulation^[3]. Despite the Bank of Korea’s skepticism about private stablecoins’ impact on monetary policy, the legislation aligns with international norms while exceeding models like the U.S. GENIUS Act South Korea Unveils Comprehensive Digital Asset Regulation^[3]. The task force’s efforts aim to position South Korea as a global leader in digital asset governance, balancing innovation with investor protection South Korea’s Bold Leap into Digital Asset Regulation^[4].

Challenges include navigating the complexity of regulating diverse stablecoin models and mitigating systemic risks. The task force must draft laws robust enough to adapt to technological advancements while maintaining flexibility. International collaboration is also critical to harmonize regulations and prevent arbitrage South Korea’s Bold Leap into Digital Asset Regulation^[4]. With institutional interest in XRP and other tokens surging and regulatory clarity emerging post-Ripple-SEC settlement, South Korea’s legislative push could catalyze broader adoption of digital assets in the region .