South Korea Bets on Won-Backed Stablecoin to Challenge Dollar Dominance

South Korea is moving forward with a comprehensive regulatory framework for won-backed stablecoins, with the Financial Services Commission (FSC) planning to submit a government bill to the National Assembly in October 2025. The proposed legislation is part of the second phase of the Virtual Asset User Protection Act, aimed at setting clear guidelines for the issuance, collateral management, and internal control systems of stablecoins. The FSC has been developing this framework since 2023, through its virtual asset committee, as part of broader efforts to regulate the digital asset sector and reduce the nation's reliance on U.S. dollar-pegged stablecoins.

According to reports, the FSC has already briefed lawmakers, including Democratic Party of Korea (DPK) Representative Park Min-kyu, on the policy direction for stablecoins. Park confirmed that the government bill would likely be introduced by October 2025, following a broader policy discussion involving lawmakers, financial institutions, and tech companies. The bill is expected to align with the country’s national strategy to enhance monetary sovereignty in the digital finance era. This initiative was first outlined during President Lee Jae-myung’s campaign, and since then, several related legislative proposals have been introduced by lawmakers from different political factions.

South Korea’s push for a local stablecoin comes amid growing global competition, particularly from the United States, where the Genius Act was recently signed into law to create a federal regulatory framework for stablecoins. Japan is also making progress, with a local fintech firm reportedly on the verge of launching its first yen-backed stablecoin. South Korea’s financial institutions are actively preparing for the introduction of a won-pegged stablecoin, with the country’s four largest banks—KB Kookmin, Woori, Shinhan, and Hana—exploring collaboration with U.S. stablecoin issuer Circle.

The development of a won-backed stablecoin is seen as a strategic move to reduce dependence on dollar-pegged tokens, which currently make up nearly 99.8% of the global stablecoin market, according to RWA.xyz data. Domestic banks have also joined forces to develop a won-pegged stablecoin by late 2025 or early 2026, aiming to offer a more stable and regulated alternative for local transactions. These efforts are supported by non-profit blockchain organizations and financial regulators, who emphasize the need for strong institutional oversight to ensure stability and trust.

However, the Bank of Korea has expressed caution, with Governor Lee Chang-yong highlighting the potential risks of multiple stablecoin issuers in the absence of strict regulations. He emphasized that such stablecoins should be limited to licensed banking institutions to prevent disruptions to the country’s foreign exchange policies. The central bank’s concerns reflect a broader regulatory approach that balances innovation with financial stability, particularly in a volatile market environment.

Meanwhile, South Korea’s government has also intensified its efforts to combat tax evasion through cryptocurrencies. Authorities in Jeju City have begun freezing and seizing digital assets from individuals suspected of evading tax obligations. These measures highlight the government’s growing focus on ensuring compliance and transparency in the use of digital assets for financial transactions.

As the regulatory and legislative landscape continues to evolve, South Korea is positioning itself as a key player in the global stablecoin market, with a growing emphasis on user protection, transparency, and monetary sovereignty. The upcoming legislative process will likely determine the pace and structure of the nation’s digital finance transformation in the coming years.

Source: [1] South Korea to Unveil Won Stablecoin Bill in October (https://cointelegraph.com/news/south-korea-won-stablecoin-bill-october-dollar-dependence) [2] South Korea's financial regulator to submit stablecoin ... (https://www.theblock.co/post/367203/south-korea-stablecoin-bill-october) [3] South Korea Launches Won-Based Stablecoin (https://pintu.co.id/en/news/195360-south-korea-launches-won-based-stablecoin-what-are-the-future-prospects) [4] Here is the New Stablecoin Won and the Law That Will ... (https://en.cryptonomist.ch/2025/08/18/digital-revolution-in-south-korea-here-is-the-new-stablecoin-won-and-the-law-that-will-change-everything/)