- South Korea only wants to allow regulated banks to make the stable coin emission-they know the dangers.
- Political pressure had led to the decision, but the central bank warns of the exodus of capital and the exchange rate risks.
The South Korean central bank is reluctant to introduce stable coins. At a press conference, the deputy governor of the Bank of Korea, Ryoo Sangdai, said that the process should be controlled by the banks. He emphasized that all stable coins that are bound to the Korean Won must first come from institutes that are already subject to a strict financial supervision.
Ryoo emphasized that every introduction of stable coins from regulated commercial banks should not be based on tech companies or start-ups. He argued that banks are already working under strict supervision, which makes them a safer channel for the output of stable coins. This gradual approach, which begins with strictly monitored institutes, would help reduce the risks for the financial system and to protect consumers from sudden shocks. He said:
“It would be desirable to initially allow the issue of stable coins primarily via banks that are subject to stricter financial supervision and then gradually expand it to the non-banking sector. The goal is to create a safety net that takes into account the potential for market disorders or consumer damage.”
Governor Rhee Chang-Yong also admitted the same concerns on a separate press conference on June 18. He mentioned that although he was not against the idea of a stable coin based on the Won, he could predict difficulties in regulating foreign exchange transactions with token.
$ 368,000 minimum capital requirement for issuers
Despite the resistance of the central bank, political measures for the issue of stable coins have already been initiated. On June 10, the government of the Democratic Party submitted the Digital Asset Basic Act under the newly elected President Lee Jae-Myung. The draft law allows the issue of stablecoins by companies that have at least $ 368,000 equity.
Nevertheless, the Bank of Korea remains careful. Ryoo said that a too quick introduction of stable coins could lead to capital flowing out of the country and colliding with South Korea’s long -term approach to managing foreign exchange regulations.
“We also have to consider the effects on the restructuring of the financial sector, including the possible introduction of Narrow Banking”.
At the same press event, Ryoo pointed out that the central bank continues to work on a digital central bank currency (CBDC). The currency can be seen as an instrument for direct coping with the stable coin challenges. The pilot project for the CBDC started at the beginning of the year and was to be completed on June 30th. The project is supported by the Financial Service Commission and the financial supervisory authority.
Global state stablecoin trend
How Chosun Daily reportedRyoo described the CBDC project in response to the growing risks. However, he also pointed out that there were still some challenges to be overcome before you could go to the next level.
“Since the position of the government is not clearly defined and there are significant uncertainties in relation to the relevant laws and guidelines, the time for the second pilot test is determined in consultation with the banks.”
Several countries worldwide are driving their stablecoin projects faster. On June 19, Bloomberg reported that Visa had a partnership with Yellow Card Financial to increase the use of Stablecoin in Africa. In April, the Russian Ministry of Finance also spoke about the opening of the emission of its stable coin, and three great players in Abu Dhabi merged to develop a stable coin bound to the dirham.
South Korea’s strategy is more careful and slower. The need for the country to take the lead to financial stability compared to a quick market launch. It will be shown whether this approach can keep up with the global trends.
No Comments