Dr. Sangmin Seo, chair of the Kaia DLT Foundation, critiques the Bank of Korea’s strategy for the banking sector to spearhead the introduction of won-denominated stablecoins, calling it illogical.
In a report published on Monday, the central bank stated that banks, already governed by rigorous regulations including capital, foreign exchange, and Anti-Money Laundering standards, could mitigate the risks related to the introduction of stablecoins in the nation.
Additionally, the BOK seeks to form a policy consultative body featuring currency, foreign exchange, and financial authorities to evaluate issuer eligibility, volume, and other critical factors.
Seo remarked to Cointelegraph that while the central bank’s concerns over stablecoin risks are valid, its rationale for entrusting banks with this initiative “appears to lack logical support.”
Clear rules for all is a better way forward: Seo
Seo contended that a more effective approach would involve creating precise regulations for stablecoin issuers that can “reduce monetary risks and encourage innovation.”
This would permit both banking and non-banking entities that meet these conditions to “compete and showcase their capabilities.”
“It would be even more beneficial if the Bank of Korea could outline guidelines on how to mitigate these risks and what qualifications are necessary for an issuer to be deemed reliable.”
In June, BOK deputy governor Ryoo Sangdai suggested that South Korean banks serve as the main issuers of stablecoins in the nation to create a safety net before gradually branching out to other sectors.
Stablecoin yield ban on the table too
The BOK also proposes prohibiting interest payments on stablecoins, asserting that this could directly compete with bank deposits and disrupt the financial sector, instead endorsing the commercialization of deposit tokens, which represent deposits in a bank or financial institution.
Seo described a complete ban on stablecoin yields as excessive and potentially detrimental to adoption.
“While I concur that stablecoins themselves should not carry any yield-bearing characteristics, I consider it excessive to prevent the generation of additional yield through their use,” he asserted.
“Doing so would greatly diminish their utility and acceptance; consequently, I believe that allowing supplementary yield generation should be permitted.”
South Korea’s stablecoin market heating up
At least eight significant South Korean banks announced intentions in June to issue a stablecoin pegged to the South Korean won, with launches planned for late 2025 and early 2026.
Related: South Korea caps crypto lending rates at 20%, bans leveraged loans
Meanwhile, Naver Financial, the fintech subsidiary of South Korea’s tech giant Naver, is reportedly advancing plans to acquire Dunamu, which runs the country’s largest cryptocurrency exchange, Upbit, and aims to initiate a Korean won-backed stablecoin project following the acquisition’s completion.
The crypto sector in South Korea has experienced a more favorable climate since the election of President Lee Jae-myung in June, who has been advancing various crypto-related legislation, including a bill to legalize stablecoins.
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