Korea opens crypto access but stays cautious, warning stablecoins may disrupt capital controls and strain regulation.
South Korea’s central bank has revised its stance on virtual assets investment within its shores. At the same time, the country continues to warn about the risk associated with stablecoins.
Comments from senior officials show rising pressure to open markets, alongside concern about capital controls and financial stability. In addition, regulatory delays persist as lawmakers debate stablecoin usage and how exchange operations.
Korean Central Bank Cautions on Stablecoins as Crypto Investment Opens
In a Monday statement, Bank of Korea Governor Lee Chang-young disclosed that South Koreans can now invest in virtual assets due to market pressure. As contained in the remarks, authorities are also planning for a new registration system. Such a system would let domestic institutions use virtual assets under tighter oversight.
Chang-young’s comments came during the Asian Financial Forum in Hong Kong. According to the Central Bank chief, the latest move is a response to demand, not a full endorsement.
He also drew a clear line between payment tools, clarifying that tokenized deposits would mainly support domestic payments. Additionally, Won-denominated stablecoins would serve international transactions.
His views reflected concern about cross-border flows rather than retail convenience. South Korea already runs a fast, efficient payment network. And this reduces the need for retail central bank digital currencies.
Chang-young warned that won-based stablecoins could weaken capital flow controls. And this trend could accelerate when won-tied coins are paired with U.S. dollar stablecoins.
Easy access to dollar stablecoins raises additional issues. Such tokens are widely used and incur lower transaction costs than moving U.S. dollars directly. Meanwhile, exchange rate swings could also push funds rapidly into dollar stablecoins.
Chang-young explained that sharp currency moves may trigger large capital flows into dollar stablecoins. And this weighs on oversight, as many non-bank firms issue these tokens.
Retail CBDCs Offer Limited Value, Says Bank of Korea Governor
Chang-young stressed that Retail CBDCs offer limited gains given South Korea’s advanced payment rails. Central bank plans instead focus on tokenized deposits and wholesale CBDCs through pilot programs, keeping a two-tier banking structure.
Key points from Chang-young’s comments include:
- Market pressure drove permission for retail crypto investment.
- Tokenized deposits are better suited for domestic payments.
- Won stablecoins could test capital flow controls.
- Dollar stablecoins offer speed and low costs but raise risk.
- Non-bank issuers complicate stablecoin oversight.
Chang-young also addressed the reform pace, reiterating that simpler rules could lift near-term economic activity. He also maintained that reforms should avoid a race to lower standards and that digital banking needs firmer rules. The Central Bank chief cited lessons from the 2008 financial crisis to further drive his position.
To build a full legal framework, the Financial Services Commission drafted the Digital Asset Basic Act. A core component of the bill is the no-fault liability, which holds operators responsible for user losses without proof of negligence.
At the same time, the pitch centered on tighter disclosures and customer protection. However, talks then stalled over control of the reserve, enforcement powers, and governance.