Bank of Korea Governor Lee Chang-yong has raised concerns about allowing non-banking entities to issue Korean won-based stablecoins.

He cited potential risks to the financial system during a press briefing on July 10, 2025.

Lee warned that such issuance could lead to currency instability reminiscent of the Free Banking Era in 19th-century America.

He expressed concerns about possible conflicts with foreign currency exchange policies and the impact on traditional banks’ profit models.

South Korea is exploring local stablecoin development as part of President Lee Jae-myung’s election pledge.

However, the Bank of Korea currently lacks authority over policies related to these stablecoins.

Lee noted that decisions will be made once government responsibilities are clarified.

🔗 Source: The Block

🧠 Food for thought

1️⃣ The free banking era’s lessons for today’s stablecoin regulation

Governor Lee’s reference to the 19th century chaos draws parallels to the Free Banking Era (1837-1864), when over 1,600 different currencies circulated throughout the United States without federal oversight 1.

This period was characterized by economic volatility, frequent bank failures, and “wildcat banking,” where institutions issued notes without sufficient backing, leaving consumers with worthless paper when banks collapsed 1.

The era ended with the National Banking Acts of 1863-1864, which established a unified federal banking system after decades of financial instability. This historical lesson connects to today’s concerns about fragmented digital currency ecosystems 1.

Governor Lee’s warning reflects economists’ views that unregulated currencies, whether paper banknotes of the 1800s or digital tokens today, face similar challenges of stability, trust, and market acceptance 1.

This history provides context for why central bankers globally remain cautious about private stablecoin issuance, even as technological capabilities have evolved.

2️⃣ The emerging conflict between banking profits and stablecoin innovation