South Korea Considers Bank-Led Stablecoin Framework Amid Regulatory Concerns

• South Korea will let banks issue stablecoins first to ensure safety and prevent market chaos. 

• The central bank is developing its digital currency while worrying about capital flight risks.

Bank of Korea Deputy Governor Ryoo Sangdai outlined plans for regulated banks to spearhead stablecoin issuance in South Korea. The approach prioritizes financial stability while addressing growing market demand for digital assets.

Speaking at a press conference, Ryoo emphasized the need for careful implementation. Banks would be the initial issuers due to their robust regulatory oversight and established safety mechanisms. The strategy aims to prevent market disruption and protect consumers from potential harm.

The deputy governor stressed the importance of gradual expansion. “It would be desirable to initially allow stablecoin issuance primarily through banks, which are subject to higher levels of financial regulation, and gradually expand it to the non-banking sector,” he stated.

Central Bank Maintains Cautious Stance

The Bank of Korea remains concerned about potential economic implications. Ryoo warned that stablecoin adoption could accelerate capital outflows and affect foreign exchange policies. The central bank fears disruption to Korea’s traditional approach toward currency internationalization.

Governor Rhee Chang-yong supported won-denominated stablecoins while highlighting challenges in foreign exchange management. His comments at a June 18 press conference reflected the institution’s balanced approach to digital currency innovation.

The regulatory uncertainty extends beyond monetary policy. Officials recognize the need for comprehensive legal frameworks before widespread implementation. Current policies lack clarity on stablecoin operations and oversight requirements.

South Korea’s ruling Democratic Party recently proposed the Digital Asset Basic Act. The legislation would permit companies with minimum equity capital of $368,000 to issue stablecoins. This represents significant progress toward formal regulation.

CBDC Development Continues

The Bank of Korea positions its central bank digital currency as a strategic response to private stablecoins. Ryoo described the CBDC as a “countermeasure to stablecoins” during the same press conference.

Government agencies, including the Financial Services Commission and Financial Supervisory Service, are conducting CBDC testing. The pilot program concludes on June 30, with future phases dependent on stablecoin policy developments.

Officials acknowledge timing challenges for subsequent testing phases. The absence of clear government positions on stablecoins creates uncertainty for CBDC implementation schedules.

International developments influence South Korea’s regulatory approach. Visa recently partnered with Yellow Card Financial to expand stablecoin adoption across Africa. The collaboration demonstrates growing institutional interest in digital payment solutions.

Russia and the United Arab Emirates have announced separate stablecoin initiatives. A Russian finance ministry official proposed government-backed stablecoin development, while Abu Dhabi institutions created a dirham-pegged digital currency.

These global trends reinforce the strategic importance of stablecoin regulation. South Korea’s measured approach reflects efforts to balance innovation with concerns about financial stability.

The country’s regulatory framework development will likely influence regional digital asset policies. Banks’ central role positions traditional financial institutions as key players in cryptocurrency adoption.