South Korea’s central bank supports Won-bound stable coins-under strict banking supervision
- South Korea prefers the careful introduction of stable coins under strict regulation to secure financial stability and consumer protection.
- At the same time, the Bank of Korea is driving its digital central bank currency, whereby the stablecoin regulations and pilot tests are still being checked.
The South Korean central bank is slowly heading for the introduction of stable coins and insists on a careful introduction under the direction of regulated banks. The Bank of Korea (BOK) has spoken out for this stable coins and at the same time emphasized the need for a strict regulatory supervision to prevent market disorders and protect consumers.
Ryoo Sangdai, deputy governor of the Bank of Korea, explainedthat the first emission of won-covered stable coins should be limited to commercial banks. At a recently held press conference, Ryoo argued that banks that are subject to strict finance regulations were a necessary safety network for the StableCoin ecosystem. According to him, the issue of stable coins should initially be made in this strictly regulated framework before it is gradually expanded to other sectors. Ryoo explained the motives of the central bank:
“As a result, the emission of stablecoins initially allowed banks that are subject to stricter financial regulation in order to then gradually expand them to the non-bank sector.”
This approach is intended to reduce the risks of market volatility and consumer protection and at the same time protect financial stability.
Concern of the central bank
Despite this openness to stable coins, the Bank of Korea remains careful when it comes to its broader economic effects. Ryoo pointed out that an introduction of stablecoins could accelerate the capital outflows from South Korea and question the country’s current foreign exchange policy, in particular the liberalization and internationalization of the Korean Won.
He also expressed concerns about disorders of the domestic financial sector, including the effects on the financial restructuring and the possible introduction of Narrow-Banking, a model that limits the banks to keep secure assets. These considerations illustrate the cautious attitude of the BOK when weighing up between innovation and financial security.
Governor Rhee Chang-Yong expressed itself At a press event on June 18th similar. Although he did not speak directly to a Won-based stable coin, he emphasized the challenges associated with the management of the exchange rate risks associated with such token.
In the middle of the discussions with the central bank, the ruling Democratic Party of South Korea proposed the Digital Asset Basic Act on June 10. The law would enable companies with equity of at least $ 368,000 to issue stable coins.
At the same time, the regulatory clarity remains in the flow. Ryoo noted that “the position of the government to stable coins is not clearly defined and there are significant uncertainties in relation to the relevant laws and guidelines, the schedule for the implementation of the second pilot test in consultation with the banks is determined”
Digital central bank currency as a counterweight
The Bank of Korea is also driving its initiatives for a digital central bank currency (Central Bank Digital Currency, CBDC). Ryoo described the CBDC as a strategic countermeasure to private stable coins. The first CBDC pilot project that started in March is to be completed on June 30th, with plans for further tests being considered.
This two -track approach – the promotion of stable coins under strict banking supervision while promoting a state -supported digital currency – is also pursued by other central banks. One wants to maintain monetary policy control in view of the increase in digital assets.
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