Bank of Korea voices concerns as South Korea moves closer to domestic stablecoin framework

South Korea’s central bank won’t oppose the issuance of won-based stablecoins but warns it could complicate foreign exchange management by increasing demand for dollar-pegged tokens. According to a recent report citing Bank of Korea Governor Rhee Chang-yong, the central bank remains cautious about the broader implications of introducing a domestic stablecoin. Rhee believes allowing stablecoins could facilitate easier conversion to dollar-backed tokens, rather than reducing reliance on them. This, he warned, could undermine efforts to manage capital flows and maintain forex stability. “Issuing won-based stablecoin could make it easier to exchange them with dollar stablecoin,” Rhee said during a press briefing, adding that such a move could “increase demand for dollar stablecoin and make it difficult for us to manage forex.” Today’s remarks build upon Rhee’s earlier warnings that allowing private firms to issue stablecoins, rather than the central bank, could weaken the effectiveness of monetary policy and complicate capital flow management, especially in a market already dominated by dollar-pegged tokens. Democratic Party backs won-backed stablecoins Rhee’s latest remarks follow the June 10 introduction of the Digital Asset Basic Act by President Lee Jae-myung’s ruling Democratic Party. The bill proposes a licensing regime for stablecoin issuers, allowing companies with at least ₩500 million (approximately $368,000) in equity capital to issue Korean won-backed tokens, subject to approval by the Financial Services Commission (FSC). The legislation would require stablecoin issuers to maintain adequate reserves and implement bankruptcy remoteness measures to protect users. Democratic Party leaders argue that a properly regulated domestic stablecoin framework would help reduce dependence on US-dollar-backed tokens like USDT and USDC, which currently dominate local trading volumes. In Q1 2025 alone, more than ₩57 trillion (approximately $42 billion) in transactions on South Korea’s top exchanges involved dollar-pegged stablecoins, according to central bank data. As such, the party views a KRW-denominated stablecoin as more of a strategic tool for strengthening South Korea’s monetary sovereignty and retaining capital within the national economy. Lee’s administration has previously warned that failing to introduce domestic stablecoins could risk Korea’s monetary influence being eroded by foreign-backed assets. FSC eyes crypto ETFs Amidst this backdrop, South Korea’s FSC has unveiled a new crypto roadmap and presented it to the Presidential Committee on Policy Planning. The roadmap outlines plans to legalize spot cryptocurrency exchange-traded funds (ETFs) and advance stablecoin regulation by the second half of 2025. According to regulators, the road map is designed to complement the Digital Asset Basic Act, as it seeks to align the country’s digital asset framework with global standards. It includes measures to establish a regulatory framework for fund structure, custody, valuation, and investor protection, all of which are key prerequisites for launching spot crypto ETFs in South Korea. Stablecoin oversight remains a central element of the FSC’s plan. In addition to issuer licensing under the pending legislation, the roadmap calls for stronger controls over how stablecoins are issued, redeemed, and backed. The post Bank of Korea voices concerns as South Korea moves closer to domestic stablecoin framework appeared first on Invezz

Source: Invezz