South Korea is advancing plans to create a stablecoin linked to the Korean won, led by President Lee Jae-Myung.

However, concerns have emerged regarding potential risks to financial stability and the impact on the country’s monetary policy.

The proposed stablecoin seeks to reduce reliance on dollar-backed crypto, which the Bank of Korea (BOK) says reached US$41.6 billion in Q1 2025.

Authorities argue the stablecoin could help curb capital outflows, but the Bank of Korea warns non-bank issuers could disrupt monetary control.

A new bill would allow firms with at least 500 million won in capital to issue stablecoins, potentially boosting competition.

Banks and fintechs are preparing for the shift, with companies like Kakao Pay seeing stock gains amid speculation of market entry.

🔗 Source: The Korea Herald

🧠 Food for thought

1️⃣ National stablecoin initiatives reflect growing currency sovereignty concerns

South Korea’s push for a won-backed stablecoin directly responds to the growth in dollar-backed stablecoin trading, which reached 56.95 trillion won ($41.6 billion) in Q1 2025—a threefold increase from 17.06 trillion won in Q3 2024 1.

This concern about “digital dollarization” is evident across Asia, where Singapore is piloting a regulatory framework requiring stablecoin issuers to maintain full reserves in high-quality liquid assets, and the Philippines is testing a peso-backed stablecoin under regulatory supervision 2.

President Lee’s administration views dollar-based stablecoins as a threat to Korean monetary sovereignty, with officials stating that Korean investors buying dollar-based stablecoins like Tether or Circle are effectively “betting on the greenback,” strengthening dollar hegemony while weakening the won 1.

The Korean approach represents a growing trend where nations are developing regulatory frameworks that balance innovation with protecting their currency’s standing in the increasingly digital global economy.

2️⃣ Central banks and governments clash over stablecoin control

The Bank of Korea’s opposition to won-based stablecoins exemplifies the tension between central banks and governments worldwide regarding digital currency regulation.

BOK Governor Rhee Chang-yong warned that “allowing a non-banking institution to freely issue won-based stablecoins could seriously weaken the effects of monetary policy,” highlighting concerns about losing control over the money supply 1.