Deputy Governor of the Bank of Korea: Hope to gradually introduce stablecoins, preferably starting with trials at banks
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Deputy Governor of the Bank of Korea: Hope to gradually introduce stablecoins, preferably starting with trials at banks
The introduction of a Korean won stablecoin should follow a "banks first, then non-bank institutions" gradual approach to ensure financial stability, said Yoo Sang-don, senior deputy governor of the Bank of Korea, on Tuesday.
Navigating Web3 tides with focused insightsAuthor: Fang Jiayao, Wall Street Insights
On Tuesday, Yoo Sang-don, First Deputy Governor of the Bank of Korea (BOK), said the introduction of won-denominated stablecoins should be gradual—starting with the most strictly regulated commercial banks issuing the stablecoins before progressively extending issuance rights to non-bank institutions. This statement marks a significant step forward in South Korea's development of a regulatory framework for digital currencies.
Starting with Bank Pilots
Yoo emphasized at a press briefing that introducing stablecoins could have major implications for monetary policy and payment settlement systems, necessitating robust safeguards to prevent financial market volatility and protect user rights.
Yoo echoed concerns previously raised by BOK Governor Lee Chang-yong regarding capital flows and financial stability. Last Wednesday, Governor Lee warned that while he does not oppose issuing won-linked stablecoins, such a move might backfire—rather than reducing reliance on dollar-denominated stablecoins, it could complicate foreign exchange controls and undermine the effectiveness of monetary policy.
Currently, the administration led by President Lee Jae-myung is accelerating legislative efforts to fulfill its campaign pledge to allow companies to issue won-denominated stablecoins. The ruling Democratic Party has proposed a draft bill aimed at establishing a solid regulatory foundation, ensuring South Korea does not fall behind other countries in the digital currency arena.
Stablecoins are cryptocurrencies designed to maintain price stability, typically pegged 1:1 to the U.S. dollar. Cryptocurrency traders use them to transfer value across different digital assets, and they are increasingly being adopted by businesses.
Besides stablecoins, Yoo noted that rising housing prices and growing household debt have become key concerns for the central bank. Against the backdrop of cooling inflation, the BOK has shifted toward an accommodative stance; last month’s rate cut brought the policy rate to the midpoint of the neutral range.
He also revealed that the BOK plans to consult with major commercial banks to prepare for a second pilot test of its central bank digital currency (CBDC). The first pilot phase will conclude next week. Initiated in late 2023, this project is a joint effort with the Bank for International Settlements (BIS).
Meanwhile, considering broader digitalization trends, South Korea is advancing reforms to internationalize its domestic currency market, further opening the won-based financial market to foreign investors. Over the past year, regulators have extended trading hours and eased access for overseas investors.
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