Dr. Sangmin Seo, chair of the Kaia DLT Foundation, argues that the Bank of Korea’s initiative for the banking sector to spearhead the launch of won-denominated stablecoins lacks sound logic.
In a report released Monday, the central bank highlighted that banks are already under stringent regulations, such as capital, foreign exchange, and Anti-Money Laundering requirements, which may help mitigate risks related to introducing stablecoins in the country.
Simultaneously, the BOK aims to establish a policy consultative body composed of currency, foreign exchange, and financial authorities to determine issuer eligibility, volumes, and other crucial aspects.
Seo informed Cointelegraph that while the central bank’s worries regarding stablecoin risks are valid, its rationale for banks leading the rollout “appears to lack a logical basis.”
Clear rules for all is a better way forward: Seo
Seo contended that a more effective approach would involve creating clear guidelines for stablecoin issuers that can “minimize monetary risks and promote innovation.”
He emphasized that this would enable both banking and non-banking entities meeting these standards to “compete and showcase their strengths.”
“It would be even more valuable if the Bank of Korea could provide guidelines on how these risks can be mitigated and what qualifications are required for an issuer to be regarded as trustworthy.”
In June, BOK deputy governor Ryoo Sangdai suggested that South Korean banks be the main issuers of stablecoins in the country to ensure a safety net, with plans to gradually extend it to other sectors.
Stablecoin yield ban on the table too
The BOK is also advocating for a prohibition on interest payments for stablecoins, contending that it could directly compete with bank deposits and disrupt the sector, while promoting the commercialization of deposit tokens—digital tokens that represent deposits in a bank or financial institution.
Seo remarked that an outright ban on stablecoin yields would be an excessive action and could hinder adoption.
“While I concur that stablecoins should not incorporate any yield-bearing attributes, I believe it would be overly restrictive to limit the creation of additional yields through the use of stablecoins,” he stated.
“Doing so would significantly restrict their utility and adoption; therefore, I think supplementary yield generation should be allowed.”
South Korea’s stablecoin market heating up
At least eight major South Korean banks announced intentions in June to introduce 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
Simultaneously, Naver Financial, the fintech subsidiary of South Korean tech giant Naver, is reportedly progressing with its acquisition plan of Dunamu, which operates the nation’s largest cryptocurrency exchange, Upbit, and intends to launch a Korean won-backed stablecoin project post-acquisition.
The crypto sector in South Korea has seen a more favorable climate following the election of President Lee Jae-myung in June, who has actively pursued various crypto-related legislations, including a bill to legitimize stablecoins.
Magazine: South Koreans dump Tesla for Ethereum treasury BitMine: Asia Express
