The Central Bank of Korea Proposes Allowing Commercial Banks to Issue Stablecoins Pegged to Won Before Expanding to Non-Banking Sectors.
The Central Bank of Korea (BOK) is supporting the phased implementation of a stablecoin pegged to the won, with initial priority given to strictly regulated commercial banks. This approach reflects BOK's cautious approach in the context of monetary policy and financial stability facing challenges from digital asset development.
BOK Senior Deputy Governor Ryoo Sang-dai believes that initially allowing commercial banks to issue stablecoins is a reasonable approach, before expanding to non-banking sectors based on practical experience. This perspective comes as South Korean President Lee Jae-myung is promoting his campaign commitment to allow companies to issue stablecoins pegged to the won.
The ruling Democratic Party of Korea is currently proposing a bill to establish the necessary legal framework to maintain South Korea's competitiveness in the rapidly developing digital asset field. According to Ryoo, prioritizing commercial banks – highly regulated institutions – will help control risks in the initial stage.
Impact on Monetary Policy and Payment Systems
Senior BOK leadership emphasized that introducing stablecoins into circulation could significantly affect monetary policy and payment systems. He reiterated BOK Governor Rhee Chang-yong's concerns about Capital flows and stressed the necessity of a sufficiently strong protection system to prevent financial market disruption and ensure user safety.
Looking to the future, Ryoo confirmed that BOK plans to consult with major commercial banks to prepare for the second test of a Central Bank Digital Currency (CBDC). The first test – a collaboration project between BOK and the Bank for International Settlements (BIS) launched in late 2023 – is expected to conclude next week.
Reflecting broader digitalization trends, the government will also accelerate market reform efforts to expand the foreign exchange market for foreign investors. These measures follow reforms implemented in the past year, such as extending trading hours and increasing international investor participation, demonstrating South Korea's commitment to modernizing its financial system and maintaining global market competitiveness.
