Dr. Sangmin Seo, chair of the Kaia DLT Foundation, argues that the Bank of Korea’s initiative for the banking sector to spearhead the introduction of won-denominated stablecoins lacks logic.
In a report published on Monday, the central bank indicated that banks are already under stringent regulations, such as capital, foreign exchange, and Anti-Money Laundering stipulations, potentially reducing risks linked to the introduction of stablecoins in the nation.
Additionally, the BOK is advocating for a policy consultative body composed of currency, foreign exchange, and financial authorities to determine issuer qualifications, volumes, and other vital aspects.
Seo remarked to Cointelegraph that while the central bank’s apprehensions about stablecoin risks are valid, its proposal for banks to lead the rollout “appears to lack a logical basis.”
Clear rules for all is a better way forward: Seo
Seo suggested establishing defined guidelines for stablecoin issuers that would “mitigate monetary risks and encourage innovation.”
He emphasized that this would enable both banking and non-banking entities meeting these standards to “compete and showcase their advantages.”
“It would be tremendously beneficial if the Bank of Korea could offer insights on how these risks can be alleviated and what qualifications an issuer must have to be deemed trustworthy.”
In June, BOK deputy governor Ryoo Sangdai advocated that South Korean banks be the primary issuers of stablecoins in the country for safety reasons, with the intention of gradually extending issuance to other sectors.
Stablecoin yield ban on the table too
The BOK is also considering prohibiting interest payments on stablecoins, arguing that this could create direct competition with bank deposits and disrupt the financial sector. Instead, they propose pursuing the commercialization of deposit tokens, which are digital tokens representing deposits in banks or financial institutions.
Seo expressed that an outright ban on stablecoin yields would be excessive and could hinder adoption.
“While I concur that stablecoins should not inherently include yield-bearing features, restricting the generation of additional yield through stablecoins would be excessive,” he remarked.
“Such restrictions would significantly curtail their utility and adoption; thus, I believe allowing additional yield generation should be permitted.”
South Korea’s stablecoin market heating up
At least eight major South Korean banks revealed plans in June to issue a stablecoin pegged to the South Korean won, with expected launches in late 2025 and early 2026.
Related: South Korea caps crypto lending rates at 20%, bans leveraged loans
Additionally, Naver Financial, the fintech arm of South Korea’s tech giant Naver, is reportedly advancing its plan to acquire Dunamu, which runs the country’s largest cryptocurrency exchange, Upbit, and intends to launch a Korean won-backed stablecoin project post-acquisition.
The crypto sector in South Korea has witnessed enhancements following the election of President Lee Jae-myung in June, who has initiated various crypto-related legislation, including a bill to legalize stablecoins.
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