A stablecoin is a type of cryptocurrency that minimizes price volatility by pegging its value to a specific asset, most commonly the U.S. dollar. To maintain this value, stablecoins are backed by collateral, with U.S. Treasury bonds frequently used for this purpose. (Image courtesy of Yonhap)
SEOUL, Oct. 27 (Korea Bizwire) – South Korea’s central bank is signaling that any won-pegged stablecoins introduced into the domestic market should be issued through regulated banks, warning that private issuers could threaten financial stability and weaken monetary control.
Stablecoins could “unlock new possibilities” for the economy, the Bank of Korea said in a report released Monday, but they also pose “new instability” if trust and safeguards aren’t ensured.
The comments come as the government considers authorizing won-denominated stablecoins to help modernize payments and keep financial activity onshore. President Lee Jae-myung has supported allowing local issuance, and the ruling Democratic Party proposed legislation in June that would permit firms to issue stablecoins backed by sufficient reserves and at least 500 million won ($349,000) in equity.
Governor Rhee Chang-yong has previously warned that coins minted by nonbank firms—including large technology companies—could interfere with monetary policy and capital-flow controls. The BOK echoed those concerns, noting that a promise to redeem one coin for one won is only a private contract, not a central-bank guarantee.
Unlike bank deposits, stablecoins lack legal protection if an issuer fails, the report said. The central bank also cautioned that stablecoins could be used to skirt foreign-exchange rules and might add volatility to short-term interest rates if issuers purchase government bonds or other reserve assets.
Making banks the lead providers—or establishing bank-led consortia that allow tech firms to participate—would allow authorities to manage the risks within existing regulation, the BOK said.
The debate underscores Seoul’s challenge in balancing crypto innovation with the need to preserve stability in a highly regulated financial system.
M. H. Lee (mhlee@koreabizwire.com)
