1.1 billion won worth of won coins issued amid regulatory vacuum, becoming a "high-yield investment asset."

Amidst the prolonged delay in enacting the Framework Act on Digital Assets (Phase 2 Virtual Assets Act), which includes the institutionalization of stablecoins, the issuance of KRW-denominated stablecoins, issued and operated outside of regulation, is rapidly increasing. In the absence of an established institutional framework, experts point out that KRW-denominated stablecoins are increasingly being used as high-yield investment assets rather than as a means of payment and settlement, diverging from their original purpose.

According to the cryptocurrency industry on the 23rd, the issuance volume of KRWQ, a Korean won stablecoin issued by overseas blockchain companies Prex and IQ, exceeded 1.1 billion won as of that day. KRW1, issued by domestic cryptocurrency custody company Bidex for the purpose of a KRW stablecoin proof-of-concept (PoC), also surpassed 100 million won in issuance volume. Considering that the issuance volume of JPYC, the first yen stablecoin issued within regulatory spheres in October of this year, was around 300 million yen (approximately 2.8 billion won), it is assessed that Korean won stablecoins have already grown to a significant scale outside of regulation.



The problem is that the use of these KRW stablecoins is focused on decentralized finance (DeFi) investments, rather than on real-world economic applications like payments, remittances, and settlements. According to KRWQ, its cumulative trading volume has reached 4.4 billion KRW, entirely generated in the DeFi sector. Most of this volume is generated through the KRWQ-USDC liquidity pool established on the decentralized exchange (DEX) Aerodrome. By depositing KRWQ into this liquidity pool and providing liquidity, users earn transaction fees whenever a KRWQ-USDC conversion occurs.

As of today, the annualized return based on transaction fees is approximately 4.85%. This is further compounded by the annualized return of approximately 84.62% from Aerodrome's own coin, AERO rewards. The recent expansion of AERO rewards is attributed to the increasing inflow of liquidity seeking high returns.

There is growing criticism in the market that KRW stablecoins are being relegated to short-term profit-seeking investment assets rather than actual currency amidst the regulatory vacuum. The Phase 2 Virtual Asset Act, which includes a regulatory framework for KRW stablecoins, has been delayed due to disagreements within the Bank of Korea, the government, and the ruling party over requirements for issuance by a bank-led consortium and the unanimous agreement of the policy consultative body. The Democratic Party of Korea initially requested the Financial Services Commission to submit the government's proposal by the 11th of this month, but this has not yet been submitted. Even if the government's proposal is submitted to the National Assembly, it is expected to undergo several rounds of additional consultation before it is introduced as a bill in January of next year at the earliest.

An industry insider said, "With institutionalization delayed due to power struggles between relevant ministries, the won stablecoin is not getting the opportunity to expand into payment infrastructure." He added, "If the regulatory vacuum continues, there are concerns that the structure could become entrenched as an investment vehicle focused on short-term profits."

Reporter Kim Jeong-woo