Kaia Executive Critiques the Illogical Approach of Korea’s Bank-Driven Stablecoin Launch

Dr. Sangmin Seo, chair of the Kaia DLT Foundation, asserts that the Bank of Korea’s initiative for the banking sector to spearhead the introduction of won-denominated stablecoins is illogical.

In a report released on Monday, the central bank claimed that existing strict regulations on banks—covering capital, foreign exchange, and Anti-Money Laundering—could effectively mitigate the risks linked to the introduction of stablecoins in the country.

Additionally, the BOK proposes a consultative body comprising currency, foreign exchange, and financial authorities to oversee issuer eligibility, volumes, and other critical factors.

Seo told Cointelegraph that while the central bank’s concerns about stablecoin risks are valid, the reasoning for banks to lead the rollout is “devoid of a logical basis.”

Clear rules for all is a better way forward: Seo

Seo believes that a more effective approach would be to implement clear guidelines for stablecoin issuers that could “reduce monetary risks and encourage innovation.”

This would also enable both banking and non-banking entities meeting the criteria to “compete and showcase their strengths.”

“It would be even more beneficial if the Bank of Korea offered guidance on how to mitigate these risks and what qualifications are necessary for an issuer to be considered reliable.”

In June, BOK deputy governor Ryoo Sangdai suggested that South Korean banks should primarily issue stablecoins to create a safety net before extending to other sectors.

Stablecoin yield ban on the table too

The BOK is also considering a ban on interest payments on stablecoins, claiming this could directly rival bank deposits and disrupt the sector, instead proposing the commercialization of deposit tokens, which are digital representations of bank deposits.