[Column] For Stablecoins to Become a Trend, Not Just a Theme

The hottest theme in the market recently has undoubtedly been stablecoins. In South Korea, related stocks soared purely on expectations even before full-scale legislation began, while banks and fintech companies rushed to apply for trademarks, joining the trend. The United States, a leader in this field, went so far as to designate the third week of July as "Crypto Week" and passed the "Digital Asset Three Acts" (Genius, Clarity, Anti-CBDC) in the House of Representatives. The day when a global standard for digital assets, led by the United States, will be established is not far off.

The market cheered these swift legislative moves by the United States. On July 14, Bitcoin reached a historic high of $120,000, even overtaking Amazon to become the fourth-largest company in the world by market capitalization. However, individual investors in Korea cannot simply celebrate. Discussions on related legislation, such as the much-anticipated Digital Asset Innovation Act, have been delayed, leading to increased volatility in the share prices of related stocks. For example, KakaoPay, which has been identified as the biggest beneficiary of stablecoins, has plummeted by about 50% from its peak. Considering that it ranks third in net purchases by individual investors this month, their losses are likely to be significant.

What needs to be done for stablecoins to become a lasting trend in the stock market, rather than a one-off event for theme stocks? Above all, swift legislation and clear regulatory guidelines are necessary. The United States serves as a model case. The "Genius" and "Clarity" bills clearly define the issuers and regulatory authorities for stablecoins. The "Anti-CBDC" bill prohibits the central bank from issuing digital currency (CBDC), drawing a line to prevent interference in the development of a market led by the private sector. While there may be various political motivations behind these bills, the important point is that they focus on minimizing regulatory uncertainty in the digital asset market. There is also an intention to avoid conflict with the existing banking sector and to operate the system cooperatively.

I believe one reason for the delay in legislating the Korean won stablecoin is the conflict of interests among various stakeholders. Notably, the Bank of Korea has consistently expressed concerns about introducing a won-denominated stablecoin, citing the risk that indiscriminate issuance of stablecoins by non-bank entities could undermine the effectiveness of monetary policy. The fact that its ambitious CBDC project now faces the risk of being scrapped entirely, as in the United States, is also an uncomfortable factor for the Bank of Korea.

However, if the government determines that stablecoins are an unstoppable global trend, it needs the determination to push forward regardless of the large and small frictions and controversies that may arise among stakeholders in the process. When laws regulating a new industry are ambiguous, companies tend to shrink back and market investment sentiment inevitably freezes. I hope that a Korean version of "Crypto Week" will be launched as soon as possible, so that stablecoins can become a lasting trend in the domestic stock market rather than just a fleeting theme.