TLDR:
- South Korea allows residents to invest in overseas virtual assets while domestic issuance remains under review
- Regulators are considering a registration system for domestic institutions issuing virtual assets
- The central bank warns won stablecoins could bypass capital controls during exchange-rate volatility
- Retail CBDC seen as limited value given Korea’s advanced payment systems and existing infrastructure
South Korea stablecoin policy debates gained visibility after central bank remarks at a major regional forum, where regulators outlined openness to virtual assets while stressing caution on capital controls, exchange-rate stability, and supervisory discipline across digital finance markets.
South Korean residents are currently allowed to invest in overseas-issued virtual assets due to sustained market pressure. However, domestic issuance remains under review as authorities assess how to integrate digital assets into existing financial oversight structures.
Regulatory access paired with guarded domestic issuance
Speaking at the Asian Financial Forum in Hong Kong, Bank of Korea Governor Rhee Chang-yong said authorities were responding to market realities. He stated that allowing overseas virtual asset investment reflects practical conditions rather than deregulation intent.
Rhee said regulators are considering “a new registration system” that would allow domestic institutions to issue virtual assets. He explained that registration would ensure issuers operate within supervisory boundaries rather than outside regulatory reach.
Addressing usage distinctions, Rhee said, “Won-denominated stablecoins will mainly be used for cross-border transactions.” He added that tokenized deposits are more suitable for domestic payments due to existing infrastructure efficiency.
Comments from the forum were widely shared on social media, with market participants quoting his remarks on regulatory sequencing. Attention focused on how authorities may permit innovation without weakening financial safeguards.
Stablecoin Risks, Capital flows, and Digital Currency Strategy
Rhee expressed concern about capital-flow circumvention tied to stablecoin adoption. He warned, “A won-denominated stablecoin could be used to bypass capital flow management measures,” particularly when paired with dollar stablecoins.
He noted that U.S. dollar stablecoins are widely accessible and cheaper to use than holding dollars directly. “When exchange-rate fluctuations affect expectations, funds can rapidly move into dollar stablecoins,” he said.
Rhee also cautioned about oversight challenges from non-bank issuers. He said that when many non-bank institutions issue stablecoins, “regulation becomes much more difficult,” especially during volatile market conditions.
On central bank digital currency development, he said South Korea’s fast payment systems reduce the need for a retail CBDC. He added that pilots continue for tokenized deposits and wholesale CBDCs to preserve the two-tier banking system.
Throughout his remarks, the South Korea stablecoin discussion centered on prudence rather than expansion. Rhee said deregulation may support activity short term, but warned standards must not fall.
Referring to past crises, he said the costs of the 2008 financial turmoil should not be forgotten. “Reform should not become a race to lower standards,” he stated.
As policy review continues, the South Korea stablecoin framework remains cautious. Authorities emphasized structured oversight, measured progress, and financial stability as guiding principles.
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