South Korean Banks Warned of Earnings Risks From Won Stablecoins

South Korea’s banking sector faces a pivotal challenge as the potential introduction of bank-issued won stablecoins gains attention. A report from NICE Investors Service highlights the possible risks and opportunities associated with these digital assets, particularly their impact on traditional banks’ interest income. Designed to maintain a 1:1 peg to the South Korean won, won stablecoins offer efficiency for transactions and remittances but threaten to displace traditional deposit-based systems that underpin bank earnings [1].

According to the report, a shift in consumer behavior toward using won stablecoins could reduce the volume of funds held in bank deposits. This would shrink the deposit base that banks rely on for lending, thereby directly impacting their ability to generate interest income—a core component of their financial model. The intermediary role of banks in facilitating transactions could also diminish, as won stablecoins offer an alternative pathway for payments that bypass traditional banking infrastructure [1].

The implications vary across the financial sector. Banks are likely to face negative effects from these changes, while securities firms may benefit. As stablecoins become more integrated into the economy, new opportunities could arise for investment products and asset management tied to digital assets. Meanwhile, the credit card industry is expected to remain largely unaffected in the short term, with its core services and infrastructure likely to persist despite the rise of alternative payment methods [1].

Despite these potential challenges, there is a pathway for banks to adapt and thrive. The report suggests that directly issuing won stablecoins could open new revenue streams through fee-based services, potentially offsetting some of the losses from reduced interest income. This transition would require banks to explore innovative business models that align with the digital currency era [1].

In response to the growing interest in stablecoins, more than ten major South Korean banks have formed a consortium. Institutions such as KB Kookmin, Shinhan, KEB Hana, Woori, and Nonghyup are working together to develop joint strategies for stablecoin issuance, establish common standards, and advocate for favorable regulatory frameworks. This collaborative effort reflects a proactive stance in addressing the evolving financial landscape and maintaining competitiveness [1].

The consortium’s initiatives are expected to focus on several key areas, including the development of stablecoin infrastructure, exploration of new service offerings, and engagement with policymakers to shape a supportive environment for digital currencies. By leveraging shared resources and expertise, the participating banks aim to navigate the complexities of the stablecoin ecosystem while safeguarding their relevance in the future of finance [1].

To remain competitive, banks must also invest in blockchain technology and digital payment solutions, while actively participating in industry partnerships. Engaging with regulators to define a clear and supportive regulatory framework will be essential in ensuring that stablecoins can be integrated into the financial system without undermining traditional banking functions [1].

In summary, the emergence of bank-issued won stablecoins represents a transformative moment for South Korea’s financial industry. While traditional banks face the risk of reduced interest income and a weakened intermediary role, they also have the opportunity to adapt by exploring new revenue models and embracing digital innovation. The success of this transition will depend on proactive engagement, collaboration, and the ability to integrate stablecoins into existing financial operations in a way that enhances, rather than diminishes, their role in the economy [1].

Source: [1]Won Stablecoins: Crucial Warning for South Korean Banks on Interest Income (https://coinmarketcap.com/community/articles/68abd7812739ae5d5e53ecb2/)