Dr. Sangmin Seo, chair of the Kaia DLT Foundation, critiques the Bank of Korea’s (BOK) initiative for the banking sector to spearhead the introduction of won-denominated stablecoins, stating it lacks rationale.
In a report released on Monday, the central bank indicated that due to stringent regulations such as capital, foreign exchange, and Anti-Money Laundering requirements, banks are well-positioned to address risks related to introducing stablecoins in the nation.
Moreover, the BOK seeks a policy consultative group comprising currency, foreign exchange, and financial authorities to determine issuer qualifications, volumes, and other essential aspects.
Sseo told Cointelegraph that while the central bank’s concerns about stablecoin risks are valid, its case for banking institutions leading the rollout “appears to lack logical justification.”
Clear rules for all is a better way forward: Seo
Seo asserted that a more effective approach would involve creating clear regulations for stablecoin issuers that can “minimize monetary risks and encourage innovation.”
He added that this would enable both banking and non-banking entities meeting these standards to “compete and showcase their capabilities.”
“It would be incredibly beneficial if the Bank of Korea could outline guidelines on how to mitigate these risks and what qualifications are needed for an issuer to be considered trustworthy.”
In June, BOK Deputy Governor Ryoo Sangdai suggested that South Korean banks be the primary issuers of stablecoins in the country to create a safety net, before eventually expanding to other sectors.
Stablecoin yield ban on the table too
The BOK also proposes banning interest payments on stablecoins, positing that they could directly compete with bank deposits and disrupt the financial landscape. Instead, it has advocated for the commercialization of deposit tokens, which are digital tokens that represent deposits in financial institutions.
Seo remarked that a total prohibition on stablecoin yields would be an overreaction and could hinder adoption.
“While I concur that stablecoins should not inherently possess yield-bearing features, I believe it would be excessive to impede the generation of additional yield through their utilization,” he stated.
“Such a restriction would significantly curtail their utility and acceptance; thus, I think allowing supplementary yield generation should be sanctioned.”
South Korea’s stablecoin market heating up
At least eight prominent South Korean banks disclosed plans in June to introduce a stablecoin pegged to the South Korean won, with launches anticipated in late 2025 and early 2026.
Related: South Korea caps crypto lending rates at 20%, bans leveraged loans
Concurrently, Naver Financial, the fintech subsidiary of South Korean tech giant Naver, is reportedly advancing plans to acquire Dunamu, which operates the nation’s largest cryptocurrency exchange, Upbit, and intends to initiate a Korean won-backed stablecoin project post-acquisition.
The cryptocurrency sector in South Korea has experienced a more favorable climate following President Lee Jae-myung’s election in June, who has since advocated for various crypto-related legislation, including a bill to legitimize stablecoins.
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