South Korea is all set to address the potential issuance of a Korean won-based stablecoin. Bank of Korea Governor Lee Chang-yong will attend a dinner meeting with bank executives on June 23, where these discussions are expected to take place.
South Korea Steps Up its Won-Pegged Stablecoins Plans
According to reports from local outlet Newsis, fresh discussion is anticipated around the speed and framework for launching such stablecoins. But, the central bank has remained cautious, particularly when it comes to non-bank entities issuing these digital assets. Their primary concern is also the possible weakening of monetary policy and risks to financial stability.
The dinner, after the Bank of Korea’s regular board of directors meeting in Jung-gu, Seoul, will also be attended by Deputy Governor Park Jong-woo. It is worth mentioning that Jong-woo oversees monetary policy and financial markets.
While the governor frequently holds formal meetings with commercial banks, his engagement with them has noticeably intensified in recent months. In mid-May, for instance, Governor Lee paid an unusual visit to the heads of six major banks, i.e., KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup, and IBK Industrial Bank, holding approx 30-minute discussions with each.
Later in the month, on May 26, Lee met with Tim Adams, chairman of the Institute of International Finance (IIF), at the BOK headquarters. Immediately, he summoned commercial bank presidents to brief them on the conversation and gather their input.
This surge in activity reflects the urgency the governor sees in addressing crypto related matters, as global conditions surrounding digital finance are shifting quickly. While Central Bank Digital Currency (CBDC) debates had previously been more active, interest has waned, particularly since the start of the Trump administration in the U.S., due in part to privacy concerns.
In contrast, talks around stablecoins have recently gained momentum. On June 10, Democratic Party lawmaker Min Byung-deok introduced the ‘Basic Digital Asset Act.’ The proposed bill advocates for legalizing the issuance of won-denominated stablecoins and creating a Digital Asset Committee under the president’s office. It also seeks to lower the minimum capital requirement for issuing firms from 5 billion won to 500 million won, a move likely to open the market to fintech firms and other non-bank entities.
This proposal stands in stark contrast to the Bank of Korea’s previous stance. While the central bank has shown some openness to the idea of won-based stablecoins in the past, it is not considering allowing non-banks to issue them. This is because of the possible market instability and reduced control over monetary tools, especially in cases of mass redemptions during financial stress.
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