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Experts skeptical as presidential hopefuls promise won-based stablecoins

Published: 28 May. 2025, 19:15

The price of cryptocurrencies, including bitcoins, are displayed on a screen at the Bithumb headquarters in southern Seoul on May 23. [NEWS1]

Stablecoins have become the new talk of the town as the presidential candidates of both major parties — liberal Lee Jae-myung and conservative Kim Moon-soo — have promised to introduce a new won-based stablecoin upon their presidency, and financial authorities aim to implement regulations within the year.

While both presidential hopefuls paint a rosy picture of a coin whose value is fixed to the stable won instead of the volatility of the crypto market, experts caution that a won-based stablecoin, rather than one tied to the U.S. dollar, may prove ineffective and could even disrupt the payments market.

On Wednesday, the Financial Services Commission announced plans to unveil the second phase of the Act on the Protection of Virtual Asset Users within the second half of this year. The legislation will include a definition of stablecoins and detailed guidelines for issuers.

“If the bill passes, it would establish a legal basis for domestic companies to issue stablecoins,” said a commission official. “Whether issuers will need approval from financial authorities or simply follow provided standards will be decided after gathering feedback from the industry.”

A stablecoin is a type of cryptocurrency designed to maintain a fixed value by pegging it to a stable asset, such as a fiat currency like the U.S. dollar, to minimize volatility. A won-based stablecoin would be a digital token that mirrors the value of the Korean won, allowing users to conduct crypto transactions in the local currency without the fluctuations common to other cryptocurrencies.

Still, demand for a won-based stablecoin remains uncertain.

The price of cryptocurrencies, including bitcoins, are displayed on a screen at the Bithumb headquarters in southern Seoul on May 22. [NEWS1]

According to cryptocurrency data platform CoinGecko, the global market capitalization of stablecoins as of Wednesday was $249.7 billion. Of that, dollar-pegged stablecoins accounted for approximately $245.3 billion — about 98 percent. This dominance stems from the U.S. dollar’s role as the world’s reserve currency.

“In emerging markets with fragile financial infrastructure and depreciating currencies, dollar-pegged stablecoins are treated like dollar-denominated assets,” said Park Sang-hyun, a researcher at iM Securities.

Because the won is not a reserve currency, a won-based stablecoin is likely to see limited demand.

“Dollar stablecoins function like legal tender within the crypto market, which creates demand. The won does not,” said one industry insider, who asked not to be named. “They might be used for purchasing cryptocurrencies on domestic exchanges, but outside that scope, their utility is still very limited.”

One of the main use cases for stablecoins — cross-border transactions — further highlights the limitations of a won-based version. International remittances via the banking network are often complicated and expensive. Stablecoins can reduce both time and cost by converting national currencies into digital tokens and back.

Representations of cryptocurrency Bitcoin are seen in this illustration picture taken in Paris, France, March 9, 2024. [REUTERS/YONHAP]

But for this to work, the underlying asset must be widely recognized. The won is not.

Korea already has a well-developed digital payments infrastructure, including mobile payment systems and online transfers, making it less appealing to use stablecoins for retail payments. In fact, even dollar stablecoins are seldom used as payment tools except in countries suffering from extreme inflation and currency devaluation.

“For stablecoins to be used in everyday retail payments, consumer acceptance must be high and businesses need strong incentives to adopt the new system — both of which will take significant time to develop,” said Kim Hye-jung, head of the digital finance team at the Korea Deposit Insurance Corporation.

Even aside from the questions over their utility, the potential downsides of won-based stablecoins are significant.

By effectively granting currency issuance powers to private entities, stablecoins could undermine the effectiveness of monetary policy. They could also pose systemic risks if an unexpected financial event occurs.

“Stablecoins have a major impact on the execution of central bank policies regarding monetary policy, financial stability and payments systems,” said Koh Kyeong-cheol, a member of the Bank of Korea’s electronic finance team, at a Korean financial law conference. “The central bank needs to be granted substantive legal authority during the licensing phase of any stablecoin issuer.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY KIM NAM-JUN [[email protected]]