South Korea's central bank has voiced significant caution regarding the potential issuance of won-pegged stablecoins, complicating the nation's ongoing efforts to establish a comprehensive regulatory framework for digital assets. These concerns, articulated by the Governor of the Bank of Korea (BoK), underscore the challenges policymakers face in balancing innovation with financial stability and capital control.
Central Bank Warns on Capital Flow Risks
Bank of Korea Governor Lee Chang-yong recently highlighted that stablecoins pegged to the Korean won could introduce complexities in managing capital flows, particularly during periods of market volatility. Speaking at the Asian Financial Forum in Hong Kong, Lee warned that such stablecoins, especially when combined with USD-pegged equivalents, might be used to circumvent existing capital flow management measures. The central bank's primary apprehension stems from the potential impact on the stability of the foreign exchange market, urging a cautious approach as legislators deliberate on the authorization and oversight of domestic stablecoin issuance.
Legislative Stalemate Over Issuance and Oversight
The BoK's stance has added a critical perspective to the legislative gridlock surrounding South Korea's proposed Digital Asset Basic Act, often considered the second phase of the country's virtual asset regulations. Progress on this pivotal bill has reportedly stalled in the National Assembly due to persistent disagreements over key issues, most notably who should be authorized to issue won-pegged stablecoins. The central bank advocates for a bank-led issuance model, arguing it would mitigate systemic and exchange rate risks. Conversely, industry groups are pushing for a broader authorization framework that would allow non-banking institutions to participate under appropriate regulatory supervision. This fundamental disagreement is not only delaying stablecoin regulations but also holding back discussions on other significant crypto initiatives, such as allowing listed companies to trade cryptocurrencies and introducing spot crypto exchange-traded funds (ETFs) in the country.
