South Korea’s Won Stablecoin Push Challenges Dollar Dominance

The Bank of Korea (BoK) is advocating for a cautious and bank-led approach to the development and deployment of stablecoins, emphasizing the need for a robust regulatory framework and systemic stability. This stance aligns with broader regional efforts in Asia to reduce dependence on dollar-pegged stablecoins and establish domestic alternatives. South Korea, in particular, is preparing to introduce a regulatory framework for a won-backed stablecoin, with a government bill expected to be submitted to parliament in October as part of the Virtual Asset User Protection Act’s second phase [3]. The legislation is anticipated to include requirements for issuance, collateral management, and internal control systems, aiming to enhance transparency and trust in the local cryptocurrency market [4].

The BoK’s cautious approach is informed by the growing prominence of stablecoins in the global financial system and the associated risks, including operational vulnerabilities and potential threats to monetary sovereignty. South Korea’s Financial Services Commission (FSC) has been working on the framework since 2023 through its virtual asset committee, aiming to align with international standards while addressing domestic needs. This regulatory push follows similar moves in the European Union and the United States, where the MiCA framework and the Genius Act, respectively, are shaping the legal landscape for stablecoins [5]. The BoK’s strategy also reflects a desire to ensure that stablecoin issuance and operations are conducted with adequate safeguards to protect users and maintain the integrity of the financial system.

South Korea’s efforts are not limited to regulatory development; major domestic banks are actively involved in shaping the future of stablecoins. A coalition of eight major banks, including Nonghyup, Corporate, Suhyup, Citi Korea, and SC First Bank, is planning to launch a won-pegged stablecoin by late 2025 or early 2026 [5]. The project is expected to adopt a trust-based or 1:1 deposit token model and will require regulatory approval. The initiative has received support from blockchain-focused nonprofit groups and the Korea Financial Telecommunications and Clearings Institute, signaling a coordinated effort between the public and private sectors to establish a stablecoin infrastructure [3]. Meanwhile, South Korea’s largest banks—Kookmin Bank and Shinhan Bank—have already begun working on a pilot project for the won-pegged stablecoin in collaboration with the BoK and the regulator [4].

The push for a domestic stablecoin is driven by the need to reduce reliance on dollar-pegged stablecoins, which currently account for 99.8% of the global stablecoin market, according to data from RWA.xyz [3]. South Korea’s lawmakers and industry stakeholders argue that a won-backed stablecoin would enhance financial sovereignty, reduce exposure to foreign exchange risks, and support the growth of the local DeFi ecosystem [4]. The country’s regulatory environment is also being shaped by increasing public and private collaboration, with industry operators highlighting how cybersecurity requirements and account segregation obligations are already best practices among regulated platforms [4]. The BoK’s advocacy for a bank-led rollout underscores the importance of ensuring that stablecoin systems are built on solid technical and legal infrastructure.

Critically, South Korea’s stablecoin strategy is being framed as part of a larger national digital transformation, with the government emphasizing the role of stablecoins in improving the efficiency of cross-border payments and financial inclusion. The proposed regulatory framework is expected to introduce strict requirements for transparency, reserves, and internal controls, ensuring that issuers meet high standards of trust and reliability [4]. This approach aligns with international regulatory trends and reflects the BoK’s recognition of the need to balance innovation with stability in the digital financial ecosystem [3]. As the country moves forward with its regulatory agenda, the outcomes of the proposed legislation and pilot projects will be closely watched by global observers, particularly as they shape the future of stablecoin adoption and governance in Asia.

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[1] Circle Bets on Its Own Blockchain in Challenge to Payment Giants (https://www.bloomberg.com/news/articles/2025-08-19/circle-bets-on-its-own-blockchain-in-challenge-to-payment-giants)

[2] Circle Acquires Malachite to Power Its Upcoming Arc Blockchain (https://www.coindesk.com/business/2025/08/18/circle-acquires-malachite-to-power-its-upcoming-arc-blockchain)

[3] South Korea to Unveil Won Stablecoin Bill in October (https://cointelegraph.com/news/south-korea-won-stablecoin-bill-october-dollar-dependence)

[4] Here is the New Stablecoin Won and the Law That Will Change Everything (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/)

[5] South Korea Pushes Won-Pegged Stablecoin Bill (https://www.coinspeaker.com/south-korea-won-stablecoin-dollar-competition)