Skip to content
- South Korea central bank tightens grip on stablecoins
- Lawmakers clash over who controls won digital tokens
- FX risks dominate Korea stablecoin regulatory battle
South Korea’s central bank has intensified its efforts to secure control over the issuance of Korean won-pegged stablecoins as lawmakers debate a long-delayed regulatory framework. The Bank of Korea has officially requested the National Assembly to limit issuance by commercial banks, citing that under such wide access, the country would be leaving itself vulnerable to risks of foreign exchange and financial stability.
The Bank of Korea, in a report to the Strategy and Finance Committee, cautioned that the won-based stablecoins are currency-like substitutes. Therefore, authorities emphasized that policy-makers need to assess their effects on the monetary policy and capital flows before allowing broader participation. Local reporting pointed out that the central bank was worried that the foreign exchange control systems could be compromised by the privately issued tokens.
Also Read: Dormant Solana Whale Moves $4.25M in SOL, Shocks Market Again
Lawmakers Face Pressure as Issuance Rules Take Center Stage
Legislators still debate the main points of the stablecoin system, such as the qualification and regulation formations. Nonetheless, the central bank has restated that the commercial banks ought to spearhead the initial rollout. Banks are already subject to high capital, compliance, and governance levels. Therefore, the regulators can handle liquidity strains and operating risks associated with the issue of digital tokens better.
Besides, the bank warned that stablecoins could enable users to avoid the current foreign exchange reporting requirements. This situation may undermine the transparency of regulation and make enforcement complicated. Also, the authorities claimed that providing independent issuance rights to non-bank entities may be contradictory to the separation of banking and commerce set by South Korea.
Structured Oversight Proposed to Limit FX Risks
Notably, the Bank of Korea stipulated structural protective measures that were meant to curb foreign exchange exposure. Although it was admitted that the programmable stablecoins would lead to more effective payments and give the digital assets a chance to evolve, the officials demanded layered supervision.
The central bank came up with a bank-based consortium model that will issue through coordination and under common standards. In addition, it suggested the establishment of a statutory interagency policy agency to harmonize regulatory controls. Reports state that the officials cited the example of the cross-agency coordination of the United States GENIUS Act framework. The cooperation that takes place in that framework is between the Treasury Department, the Federal Reserve, and the Federal Deposit Insurance Corporation.
Simultaneously, the players in the industry and a few legislators have raised concerns regarding the restriction on banks. Some of these critics believe that the inclusion of broader participation will create competition and enhance speed in innovation. However, the Bank of Korea believes that gradual growth is to be made after thorough risk evaluation.
With the discussion on the stablecoin framework persisting, the Bank of Korea has been keen on reasserting its authority in issuing tokens pegged to the won, as evident in its revived intervention. The result of this regulatory confrontation will determine the approach that South Korea will take to strike a balance between digital asset creation and foreign exchange and monetary stability insurance.
Also Read: Robinhood Testnet Reaches 4 Million Transactions in First Week, Tenev Confirms Developer Surge
