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Digital won on the horizon as Korea joins global stablecoin race

Published: 23 Jun. 2025, 16:05 Updated: 23 Jun. 2025, 18:56

JIN MIN-JI
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[GETTY IMAGES]

Korea is aggressively pushing for the adoption of local currency-pegged stablecoins, as the global financial landscape is rapidly reshaping amid evolving regulatory frameworks.

The new Lee Jae Myung administration strongly wants in on the $250 billion market for stablecoins as a strategic tool to bolster Korea’s financial sovereignty and reduce reliance on rapidly growing foreign digital currencies.

Shares of companies expected to jump into the stablecoin business are surging, including Kakao Pay that soared 141 percent this month.

While concerns persist — particularly regarding its potential impact on the monetary policy system — experts largely agree that developing stablecoin is unavoidable.

Bank of Korea Gov. Rhee Chang-yong speaks in a press conference held at the bank in central Seoul on June 18. Rhee said he “does not disagree” with the issuance of stablecoins. [BANK OF KOREA]

Bank of Korea Governor Rhee Chang-yong, who has previously expressed concerns that stablecoins could undermine the monetary policy framework, acknowledged that they are nonetheless necessary.

“To be clear, won-backed stablecoins are necessary and [I] do not disagree with its issuance,” said Rhee in a press conference on June 18. But he added the need to examine their potential impacts on foreign exchange management.

Stablecoins are cryptocurrencies pegged to another asset to keep a constant value. They are typically backed by low-risk assets like U.S. dollar and Treasury bonds.

“If we don’t issue our own digital currency, we’ll likely end up using ones issued by other countries as we move toward a digital economy — just like how Tether (USDT) is already widely used in Korea these days,” said Park Sung-jun, director of the Blockchain Research Center at Dongguk University and CEO of blockchain platform AndUs.

“That could ultimately make the won useless,” he added.

Movement to establish regulatory framework for stablecoin is global.

The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act), a cryptocurrency bill that establishes regulatory framework for stablecoin issuers, was passed by the U.S. Senate on June 17, paving the way for private companies to issue stablecoins within a regulated environment.

U.S. Treasury Secretary Scott Bessent said earlier June that the U.S. stablecoin market could grow nearly eightfold to over $2 trillion in the next few years.

Trading of stablecoins is surging in Korea.

The total trading volume of the three major stablecoins – USDT, USDC, USDS – on Korea’s five major trading platforms reached 57 trillion won ($41.5 billion) in the first quarter, according to the Bank of Korea data submitted to a lawmaker.

Rep. Min Byoung-dug from the Democratic Party of Korea introduces the Digital Asset Basic Act during a press conference at the National Assembly in Yeouido, western Seoul, on June 10. [YONHAP]

Won stablecoin, on the horizon
The ruling Democratic Party in June proposed the Digital Asset Basic Act, aimed at establishing market order and ensuring financial stability in the crypto sector.

The act promotes competition by providing a clearer regulatory framework for private entities to issue stablecoins, addressing the lack of a legal pathway that had previously kept most Korean companies out of the market.

Under the act, companies with at least 500 million won in equity capital would be permitted to issue stablecoins, provided they guarantee redemptions through secured reserves. The digital assets, including stablecoins, must also be approved by the Financial Services Commission.

Some argue the bar is set too low.

“The equity requirement is so minimal that it could allow almost anyone to issue a stablecoin,” said Kim Hyoung-joong, Director of the Cryptocurrency Research Center at Kookmin University.

“Having too many stablecoins could create confusion in the market. For Korean stablecoins to really take off, we need a few strong, reliable ones that can compete in the global market.”

Among the various types of stablecoins backed by different asset classes, those tied to real-world assets such as gold and government bonds are considered most suitable for Korea, according to Hong Jin-hyun, an analyst at Samsung Securities, in a report on June 13.

“The relatively lower demand and usage of won-backed stablecoins -– compared to those pegged to the U.S. dollar -– combined with Korea’s already advanced fintech infrastructure, are expected to limit their overall usability.” Hong noted.

Korea’s sophisticated payment system, driven by platforms like Kakao Pay and Toss Pay has already made online transactions highly accessible.

“Without enhancing usability and offering competitive returns –- such as through interest payments -– global expansion and listings on international exchanges will remain challenging,” Hong added.

To broaden the applications of won-backed stablecoins, Korea needs to raise global demand for Korean products and services.

“We can boost transaction volume in won-backed stablecoins by enhancing the global competitiveness of Korean industries,” said Professor Kim Yong-jin, who teaches management information systems at Sogang Business School.

“For example, demand for won-backed stablecoins would rise if assets like BTS music copyrights were traded using them.”

Potential threats and coping methods
Despite the growing support, stablecoins also face resistance.

Critics have raised concerns that stablecoins could lead to capital outflows and exchange rate manipulation by diverting financial activity outside traditional channels.

Bank of Korea Gov. Rhee expressed concerns over potential threat the digital currency may impose on monetary policy system.

“Allowing non-bank institutions to issue won-backed stablecoins can significantly undermine the effectiveness of monetary policy, as it can act as a substitute for currency,” said Rhee during a press conference in May.

He said that institutional measures must be put in place to prevent traders’ circumvention of foreign exchange markets.

“Stablecoins could weaken the central bank’s control over the currency exchange rate as it can fluctuate independently of the bank’s interest rate,” said professor Kim from Sogang University.

“To minimize such impacts and build public trust –- an essential foundation of any currency -– stablecoins should be jointly developed by the government and a public foundation.”

The government can generate earnings by making investments using reserves that back the stablecoins, he added.

The New York-based Circle Internet, the world’s second-largest stablecoin issuer by market value, reported revenues exceeding $1.5 billion last year, which was largely propelled by interest income from reserves that back its stablecoin. Its shares have soared 168 percent on its debut on the New York Stock Exchange earlier this month.

“The right approach to issuing stablecoins is to put the mechanisms in place to minimize potential side effects, not blocking it altogether,” said Park from AndUs.

BY JIN MIN-JI [[email protected]] –