Seoul: The issuance of stablecoins should be allowed primarily through banks before being gradually expanded to non-banking sectors to ensure a safety net, a deputy chief of the South Korean central bank said Tuesday.
According to Yonhap News Agency, the remarks by Bank of Korea (BOK) Deputy Gov. Ryoo Sang-dai came amid the Lee Jae Myung administration's push to adopt won-pegged stablecoins as part of efforts to modernize the financial system and curb capital outflows. Ryoo emphasized that stablecoin issuance should initially be limited to banks, which are subject to higher levels of financial regulation, before expanding to the non-banking sector. This approach aims to establish a safety net and mitigate potential market disruptions or consumer harm.
While Ryoo expressed support for the innovation potential of stablecoins, he raised concerns about their implications for the central bank's core mandate of maintaining financial stability based on a secure payment and settlement system. He noted that the issuance of won-based stablecoins could alter the fundamental stance on foreign exchange liberalization and the internationalization of the Korean won. Additionally, Ryoo highlighted the need to consider financial sector restructuring, including the potential introduction of narrow banking, where banks provide payment services without engaging in lending.
Stablecoins, which are cryptocurrencies pegged to another asset like the U.S. dollar to maintain a constant value, have seen growing adoption. BOK data indicates that transactions involving stablecoins like USDT, USDC, and USDS on major local exchanges surged significantly from the third to the fourth quarter of 2024 but saw a slight dip in the first quarter of the following year.
Last week, BOK Gov. Rhee Chang-yong stated that he did not oppose the issuance of won-denominated stablecoins, though he expressed concerns about the impact of non-banking entities issuing stablecoins on state monetary policy and capital flow control. President Lee has consistently supported allowing local entities to issue stablecoins. The ruling Democratic Party recently proposed the Digital Asset Basic Act, which permits domestic companies to issue won-denominated stablecoins if they hold minimum equity capital and reserves.
In a move signaling the government's commitment to promoting the crypto market, President Lee appointed Kim Yong-beom, former head of a local think tank affiliated with Hashed Ventures Inc., as senior presidential secretary for policy.