South Korean Presidential Candidate Proposes Domestic Stablecoin to Curb Capital Outflows

South Korean presidential candidate Lee Jae-myung has proposed the issuance of a Korean Won-backed stablecoin as part of his campaign platform. This initiative aims to prevent capital outflows and reduce the country's reliance on foreign digital currencies such as USDT and USDC. Lee believes that a domestic stablecoin would help stabilize the financial system, avoid overreliance on foreign currencies, and retain economic value within Korea. Currently, Korea prohibits the issuance of domestic stablecoins, which are digital assets pegged to the Korean won. Instead, only foreign stablecoins such as USDT and USDC are traded locally, raising concerns about capital outflows.

Lee's proposal comes as lawmakers prepare the Digital Asset Basic Act to regulate digital assets in the country. This bill is expected to cover regulations on the legal status, issuance, circulation, and listing of digital assets. It is also expected to stipulate that stablecoin issuers must obtain approval from the Financial Services Commission and maintain reserves of at least 50 billion won. Lee's proposal has been met with both support and criticism. Some argue that a domestic stablecoin could help stabilize the financial system and retain economic value within Korea, while others warn of the macroeconomic risks of granting stablecoins quasi-currency status. Shin Bo-sung, a senior researcher at the Korea Capital Market Institute, warned that allowing stablecoin issuance could inflate the overall money supply and create significant unintended consequences. "It effectively hands the privilege of money creation to the private sector. We must not overlook the economic principles behind them. Stablecoins are essentially another form of banking, creating money out of nothing," Shin said.

Lee's proposal is part of a broader effort to expand digital asset markets and deepen integration with the mainstream economy. Both Democratic Party of Korea presidential candidate Lee Jae-myung and People Power Party rival Kim Moon-soo have pledged to legalize and promote spot cryptocurrency exchange-traded funds, signaling a shift in the country’s financial policy landscape. At the heart of the candidates’ platforms is a shared commitment to legalize spot crypto ETFs, which would allow digital assets such as Bitcoin to be listed on the country’s stock markets. Lee has outlined plans to establish an integrated monitoring system and lower transaction costs, aiming to provide investors with a regulated, accessible entry into cryptocurrencies. Unlike cautious Korean regulators, Lee's campaign argues that including digital assets in diversified portfolios is crucial for effective hedging against their unique volatility, which differs from traditional assets such as stocks and bonds.

Legislative proposals are also underway to amend the Capital Markets Act to recognize cryptocurrencies as eligible underlying assets, fueling optimism that the legalization of crypto ETFs could become a reality soon. Lee’s campaign proposes to allow institutional investors, such as the National Pension Fund, to make direct investments in digital assets once their value stability criteria are met, potentially paving the way for large-scale, mainstream participation. Candidates’ backing increases the likelihood of policy breakthroughs, and if approved, crypto ETFs would let retail investors gain digital asset exposure within regulated environments, without the complexities of direct crypto holdings. Lee Keun-ju, president of the Korea Fintech Industry Association, welcomes the moves to adopt spot crypto ETFs. “A Bitcoin spot ETF is not simply a product. It can be the gateway to broadening the connection between the digital asset ecosystem and the capital market,” he said, adding that legal and infrastructure reforms will be essential to support this transition.