Bank of Korea Urges Limits on Won Stablecoin Issuance

Bank of Korea urges limits on won stablecoin issuance, warning lawmakers about monetary policy, foreign exchange stability, and financial risk concerns.

South Korea’s central bank has renewed calls to restrict Korean won stablecoin issuance. Officials said private tokens could interfere with the effectiveness of monetary policy. Consequently, lawmakers were given updated advice on caution and structured regulatory oversight.

Bank of Korea Flags Monetary and Financial Stability Risks

In a report submitted to the National Assembly Strategy and Finance Committee, the Bank of Korea reported concerns. Additionally, the bank characterized won stablecoins as “currency like substitutes.” Therefore, policy makers were urged to weigh macroeconomic implications in addition to benefits to the industry.

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Furthermore, the report noted possible threats to the transmission mechanisms of monetary policy. Stablecoins, being privately issued, could undermine interest rate control and liquidity control. As a result, authorities emphasized the need to retain central bank control over money-linked instruments.

Han Eun, who was quoted in local reporting, supported the bank’s published regulatory position. Moreover, Han Eun said stablecoin adoption must be carefully considered in terms of systemic risks. Consequently, monetary policy, stability of foreign exchange, and financial security were given priority.

Additionally, Han Eun said that Won stablecoins can be written to enable programmable digital payments. The capabilities of smart contracts could benefit transaction efficiency across digital platforms. However, these benefits have to be weighed against issues of regulation and economic stability.

Central Bank Recommends Bank-Led Issuance Framework

On the other hand, Han Eun stressed on the risks associated with foreign exchange regulation circumvention. Stablecoins are allowed to possibly avoid pre-reporting requirements for cross-border transactions. Therefore, the regulators were warning of higher monitoring needs and higher compliance safeguards.

Moreover, Han Eun warned against issuing from purely private or non-bank entities only. Such expansion may create conflict between industrial and financial capital interests. And as a result, the concentration of economic power may reshape the stability of the financial sector.

Therefore, the Bank of Korea recommended the safeguards such as a bank-led consortium model. Additionally, proposals were made for the establishment of statutory policy coordination bodies between the regulators. This structure would increase oversight, governance standards and systemic risk controls.

The report also mentioned international regulatory developments, especially in the United States. Under the GENIUS Act, there has to be a Stablecoin Certification Review Committee. Moreover, the committee includes the Secretary of the Treasury, the Federal Reserve Chair, and the Federal Deposit Insurance Corporation (FDIC) representatives.

Han Eun repeated that won stablecoin issuers should be primarily licensed banking institutions. High standards of regulation, over capital, governance, and compliance were recommended.

Previously, Han Eun answered similar concerns in a written response by the National Assembly on February 18. Moreover, Han Eun said stablecoin issuance should be expanded after validating bank-centered stability. Therefore, risk minimization is still at the heart of regulatory planning.

Meanwhile, policymakers continue debating the framework of stablecoins, as more and more people adopt digital assets. Moreover, financial authorities search for innovation without compromising the system of currency management. As a result, South Korea’s policy towards stablecoins is closely monitored under the legislative and regulatory scope.