South Korea’s Stock Market Surges 30% Year-to-Date on Stablecoin Enthusiasm

South Korea’s stock market has experienced a significant surge, driven by the enthusiasm surrounding won-pegged digital assets. This rally was sparked by the newly elected President Lee Jae-myung’s pledge to support stablecoins backed by the national currency. The Kospi index has surged nearly 30% year-to-date over the past week, with stocks linked to the Bank of Korea’s digital currency initiative, such as Kakao Pay and LG CNS, seeing substantial gains. Kakao Pay, in particular, has more than doubled in value this month, while LG CNS climbed nearly 70% before pulling back slightly.

On the Kosdaq junior market, Aton, a fintech security firm, saw its shares jump 80%, and mobile game developer ME2ON tripled after its subsidiary launched a dollar-pegged stablecoin for casino platforms. The rally has pushed South Korea’s Composite Stock Price Index, or KOSPI, up almost 30% this year, lifting it to near four-year highs and making it Asia’s top-performing market for the first half of 2025. Retail investors have flocked to the rally, with outstanding margin loans swelling to Won20.5 trillion.

Despite the euphoria, the government has yet to reveal specific policies for won-based stablecoins, leaving the market to trade on expectations fueled by President Lee’s appointment of Kim Yong-beom, a well-known digital asset advocate, as his chief policy adviser. Momentum has been further supported by a bill introduced by the ruling party this month, proposing to allow companies with as little as Won500 million in equity to issue won-based stablecoins. Critics warn this could expose the financial system to undercapitalized players and heighten systemic risks.

South Korea, home to one of the world’s most active crypto markets, saw trading in dollar-pegged stablecoins hit Won57 trillion in the first quarter alone, increasing pressure on the Bank of Korea to accelerate its own digital currency rollout. Banks, brokerages, and fintech firms are eager to enter the stablecoin space but remain wary of forthcoming regulations. Bank of Korea governor Rhee Chang-yong has voiced concerns about stablecoins issued by non-bank entities, highlighting risks to capital flows and monetary policy. The central bank plans to consult major lenders on a second pilot for its digital currency.

As reported, South Korea’s Financial Services Commission has presented a roadmap to the Presidential Committee on Policy Planning proposing the approval of spot crypto ETFs. The move came after President Lee Jae-myung’s campaign promise to modernize digital asset rules and boost opportunities for younger investors. The plan outlines implementation measures for spot crypto ETFs and regulatory frameworks for won-based stablecoins in the second half of 2025. Historically, the FSC blocked crypto ETFs over volatility and financial risk concerns, maintaining that cryptocurrencies were unsuitable as underlying assets.