South Korea’s Won Stablecoin Bill Triggers Political Pushback

• South Korea debates bank-led won stablecoins as lawmakers, FSC, and BOK clash intensify.
• Capital outflow fears drive tighter issuance rules favoring bank control models.
• Bill adds strict exchange IT, capital, and liability standards for crypto firms locally.

South Korea’s push to legalize bank-led, won-denominated stablecoins has met resistance in Seoul, as lawmakers, regulators, and the central bank clash. The debate surfaced following the Financial Services Commission’s revised bill submitted to the National Assembly. The proposal reshapes who can issue stablecoins, why controls matter, and how capital outflows could occur.

Political Resistance and Stablecoin Control

The revised bill has intensified friction between the ruling Democratic Party of Korea, the Financial Services Commission, and the Bank of Korea. Lawmakers objected after the FSC shifted toward the central bank’s stricter position. The change limits stablecoin issuance to consortia led by banks with majority control.

Previously, the FSC and ruling party favored broader access for fintech and blockchain firms. However, regulators now back the Bank of Korea’s concerns about capital flight risks. As a result, the policy debate has moved from innovation toward financial containment.

Under the revised framework, banks must hold at least 50% plus one share in any issuing consortium. However, tech firms may still participate and become the largest single shareholder. Banks would nonetheless retain overall control during the early phase.

According to financial industry officials, the FSC submitted this version recently to the National Assembly. The proposal also leaves room for future negotiation through presidential decrees. Consequently, lawmakers have signaled plans to draft alternative legislation.

Central Bank Concerns Over Capital Outflows 

At the core of the disagreement is capital liberalization and overseas remittances. The Bank of Korea has warned that non-bank stablecoin issuance could accelerate capital outflows. Officials argue this trend could undermine Korea’s long-standing bank-mediated controls.

Currently, individuals can remit up to $100,000 annually without reporting to banks. However, regulators fear stablecoins could bypass these safeguards. Notably, wealthy individuals could convert cash into won-denominated stablecoins, then move funds abroad.

The Bank of Korea has held this view for years. It warns that allowing unchecked issuance could pull money out of the local economy. The central bank ties this risk to Korea’s wider economic approach, which focuses on keeping wealth within the country.

In the past, the FSC and the ruling party pushed back, saying wider participation would boost competition and drive innovation. However, the FSC’s recent move to side with the Bank of Korea signals a clear change in stance.

The central bank also pointed to data to support its concerns. Bank of Korea figures show that overseas transfers totaled about $12.27 billion between 2022 and August 2024. These transfers often list education or family support as purposes.

However, officials suspect some funds support overseas property purchases or investments. The United States ranked first among destination countries, followed by Canada, Australia, and Japan.

Related: South Korea Pushes Early Account Freezes to Stop Crypto Abuse

Stricter Rules Proposed for Exchanges and Issuers

Beyond limits on issuing tokens, the bill adds stricter rules for crypto exchanges. Exchanges would be required to meet the same IT stability standards as traditional financial institutions, with the goal of reducing outages and system failures. 

The proposal also makes exchanges fully responsible for losses caused by hacks, meaning users must be repaid even if the exchange was not directly at fault. On top of that, regulators could levy fines of up to 10% of an exchange’s yearly revenue.

Stablecoin issuers would face capital requirements as well. The bill sets minimum paid-in capital at 5 billion won, or $3.7 million. Regulators say this level balances financial soundness and market access.

Authorities said they are willing to be flexible with the threshold. As the market matures, regulators may increase capital requirements over time. This gradual approach helps tighten rules without causing sudden disruption. The FSC also said that licensing details, including ownership and shareholder structures, will be set at a later stage. Presidential decrees would formalize these standards. 

However, lawmakers have challenged this approach, citing limited legislative oversight. Members of the Democratic Party plan to form a task force. The group aims to propose an alternative digital asset bill. Some expect prolonged discussions in the coming months.

South Korea’s debate over a bank-led stablecoin shows disagreements among the FSC, the Bank of Korea, and ruling party lawmakers. The revised bill tightens issuance control, raises compliance standards, and addresses capital outflow concerns. However, lawmakers’ resistance ensures continued debate as the National Assembly weighs competing regulatory priorities.