South Korea's Stablecoin Deadlock: Banks vs. Regulators in High-Stakes Countdown

South Korea's lawmakers are intensifying pressure on regulators to finalize a stablecoin framework by December 10, warning of independent legislative action if the deadline is missed. The Financial Services Commission (FSC) faces mounting urgency as the National Assembly's ruling party threatens to bypass regulatory delays and draft its own bill, reflecting growing frustration over stalled progress amid a fractured regulatory consensus. The deadline, announced by Maeil Business Newspaper, underscores the government's push to establish clear rules for stablecoin issuance amid global regulatory shifts and rising domestic crypto adoption.

The impasse centers on the role of banks in stablecoin governance. The Bank of Korea (BOK) insists that banks must hold a majority stake-51% or more-in any stablecoin consortium to mitigate financial stability risks, arguing that their regulatory oversight and anti-money laundering expertise make them ideal stewards. This stance, outlined in a recent BOK study, frames stablecoin issuance as akin to "narrow banking," a practice the central bank warns could destabilize foreign exchange markets if non-banks dominate. Conversely, financial regulators, including the FSC, advocate for broader industry participation, citing innovation and competition.

The urgency is compounded by global trends. South Korea's 2021 virtual asset user registration system, now expanded to cover all transactions, has heightened regulatory scrutiny. Concurrently, Switzerland's delay in implementing crypto tax-sharing rules until 2027 highlights the complexity of cross-border compliance, adding pressure on South Korea to align with international standards. Domestically, the aftermath of the 2022 Terra collapse has made regulators wary of stablecoin risks, particularly after recent high-profile hacks, such as Upbit's $36 million Solana breach.

Industry players are also pivoting. Sony Bank, in partnership with Bastion, aims to launch a U.S. dollar-pegged stablecoin by fiscal 2026 for PlayStation and anime payments, though U.S. regulatory approval remains pending. Similarly, Naver and Dunamu are accelerating stablecoin initiatives amid potential mergers, signaling corporate confidence despite regulatory uncertainty.

As the December 10 deadline looms, the FSC's ability to reconcile divergent views on bank involvement will determine South Korea's position in the global stablecoin race. Failure to act could see lawmakers impose a framework favoring tech firms, while a bank-led model risks stifling innovation. The outcome will shape the country's digital asset landscape, balancing financial stability with the disruptive potential of stablecoins in a market where over 10 million citizens hold crypto assets.