- South Korea’s central bank cautiously adopts stablecoins, balancing stability and innovation.
- A consortium of South Korean banks is launching a won-backed stablecoin to compete globally.
- The stablecoin rollout begins with regulated banks, ensuring integration and oversight.
The central bank of South Korea is proceeding cautiously regarding the adoption of stablecoins, aiming to enhance financial stability while promoting innovation. Such a cautious stance is aimed at striking a balance between innovation and potential threats to the economic system.
The move by the central bank is an approach to the increasing popularity of digital currencies (especially stablecoins) from a global perspective. It aims to assess the risks and benefits of integrating these digital assets into South Korea’s economy.
South Korean Banks to Launch Won-Backed Stablecoin
A report on Wednesday revealed that eight major South Korean banks, including KB Kookmin and Shinhan, are collaborating to issue a won-backed stablecoin. The initiative marks the South Korean banking industry’s initial step into the domain of digital assets. The banks are collaborating with institutions such as the Financial Supervisory Service and the Open Blockchain and DID Association.
This won-backed stable coin will have two main issuance models, trust-based and deposit-linked. The trust-based model will create coins when the customer’s money is entrusted, whereas in the deposit-linked model, coins will be created against the bank’s money in a 1:1 ratio. These models are currently under technical and legal review to finalize the details.
The stablecoin project is seen as South Korea’s effort to compete with the rising global influence of dollar-backed stablecoins. A banking official highlighted the urgency of preserving the country’s financial independence, noting that a won-backed digital currency could help maintain competitiveness while tapping into the global digital payments and remittance market.
Even with the drive towards innovation, the Bank of Korea is being cautious. It expresses concern about the potential for stablecoins to undermine monetary policy and financial stability. The central bank aims to ensure that the implementation of stablecoins does not compromise these crucial areas of the financial system.
Related: South Korea Signals Major Crypto Policy Shift In 2025
South Korea’s Digital Asset Bill
The proposed Basic Digital Asset Act would provide a legal framework for stablecoins and other virtual assets. This bill is already being discussed in the National Assembly and is expected to provide clear rules for regulating digital assets. It aligns with the Bank of Korea’s efforts to establish a sustainable environment by incorporating digital assets.
The first phase of the rollout will focus on the regulated commercial banks and then extend to the non-bank sector. Such a strategy will enable the central bank to assess the impact of stablecoins and enhance its regulatory framework. It will also enable financial institutions to gain experience in the stablecoin market before its wider adoption. The gradual introduction of stablecoins will help maintain financial stability while promoting innovation and Web3 evolution.
Through this strategy, South Korea will encourage the proliferation of a crypto-friendly environment without compromising on financial integrity. The approach that will be essential to take as the nation proceeds with its plans is the monitoring and governance of stablecoins. This would ultimately make South Korea more effective in the international cryptocurrency market and protect its economy.
