South Korea's First Regulated Stablecoin Could Reshape Digital Payments

BDACS, a South Korean digital asset custodian, has launched KRW1, the country’s first Korean won-backed stablecoin on the Avalanche blockchain, in collaboration with Woori Bank. Each KRW1 token is fully collateralized with Korean won deposited in escrow at Woori Bank, ensuring a 1:1 backing of the stablecoin with real-world fiat assets. This initiative follows a successful proof of concept (PoC), validating the technical infrastructure for fiat deposits, token issuance, and blockchain verification. The stablecoin’s launch is considered a key development toward regulated, bank-integrated digital money in South Korea.

The development underscores the growing integration of blockchain technology into traditional financial systems. BDACS and Woori Bank have leveraged Avalanche’s high-performance capabilities and regulatory recognition to create a stablecoin that aligns with Korea’s evolving digital economy. The blockchain’s reliability and scalability make it an ideal infrastructure for a regulated stablecoin, according to Justin Kim, Head of Asia at Ava Labs. The real-time API integration enables instant verification of reserves, enhancing transparency and trust in the system.

BDACS envisions KRW1 as a versatile financial tool, applicable to remittances, payments, investments, and public-sector programs. The company is particularly interested in deploying the stablecoin for low-cost payment and settlement systems in emergency relief efforts. Harry Ryoo, CEO of BDACS, emphasized the company’s role in building the “backbone of the digital asset market,” supporting corporate, institutional, and public-sector partners. KRW1’s deployment is also expected to significantly reduce transaction fees, positioning it as a potential technical standard for stablecoins in South Korea.

The stablecoin initiative aligns with broader regional and global trends. South Korea has seen a surge in interest from traditional financial institutions, with several major banks, including Kakao Bank, Kookmin Bank, and the Industrial Bank of Korea, filing for their own won-backed stablecoin trademarks. Japan is also advancing its stablecoin initiatives, with JPYC expected to secure regulatory approval for its yen-backed stablecoin and Ripple and SBI Holdings preparing to launch RLUSD under Japan’s amended Payment Services Act. In China, the Hong Kong unit of the Bank of China saw a notable share price increase following reports of its interest in applying for a stablecoin issuer license.

Domestically, the regulatory landscape is evolving. Korean lawmakers have proposed competing bills governing stablecoin issuance, reflecting a divided approach to regulation. While the Democratic Party’s proposal mandates a minimum capital requirement and bans interest payments, the People Power Party’s legislation focuses on licensing and disclosure requirements. These developments highlight the ongoing debate on balancing innovation with financial stability and consumer protection in the stablecoin space.