South Korea Eyes Gradual Stablecoin Introduction

Bank of Korea Signals Cautious Approach to Stablecoins

South Korea is considering a gradual introduction of won-denominated stablecoins, according to a senior deputy governor at the Bank of Korea (BOK). Ryoo Sang-dai emphasized the importance of a carefully managed rollout, prioritizing banks due to their existing regulatory oversight.

Phased Implementation

The BOK's proposed strategy involves:

• Initial Phase: Allowing established and heavily regulated commercial banks to issue stablecoins pegged to the Korean Won.
• Subsequent Expansion: Gradually extending permissions to non-bank entities as experience and regulatory frameworks develop.

This cautious approach aims to mitigate potential risks associated with stablecoins, including impacts on monetary policy, transaction settlement systems, and capital flows.

Concerns and Safeguards

The BOK acknowledges potential challenges, such as:

• Impact on monetary policy.
• Capital flow management.
• The necessity of a safety net to prevent financial market disruptions and ensure user protection.

Ryoo Sang-dai echoed concerns raised by Governor Rhee Chang-yong, highlighting the need for robust regulations and consumer safeguards.

Policy Context

President Lee Jae Myung's administration is actively exploring the use of stablecoins and digital assets. Legislative efforts are underway to establish the necessary regulatory infrastructure to support the development of a thriving and safe digital asset ecosystem in South Korea.

CBDC Exploration Continues

The Bank of Korea is also progressing with its central bank digital currency (CBDC) initiatives. A second pilot test is planned in consultation with commercial banks, following the completion of the initial pilot project. The BOK is collaborating with the Bank for International Settlements (BIS) on CBDC development.

Market Reforms

In line with digitalization trends, South Korea plans to open up its currency market to foreign investors, building on recent efforts to extend trading hours and facilitate overseas participation.