At This Rate, Will We Miss Everything?... Who Really Benefits from the Rapid Push for Won-Based Stablecoins? [Finance Microscope]

If a New Market Is Established, Issuer Benefits Are Clear... Korea's Growth Potential Remains Uncertain
Consumers Exposed to Coin Run Risks... Divergent Views on What Constitutes Sufficient Safeguards
KRW 5 Billion vs 50 Billion in Capital? Some Arg

The movement to introduce a won-based stablecoin is gaining momentum. With the expansion of the market anticipated due to the pro-stablecoin stance of the Donald Trump administration in the United States, calls to expedite institutionalization so as not to miss the 'golden time' have grown stronger. However, some argue that stability, which is just as important as innovation, must not be overlooked. They insist that measures to minimize risks threatening consumer protection and financial stability should be prioritized.

Time is passing while opposing arguments are fiercely exchanged, and there is a lack of public forums to mediate and compromise these views. Is this an issue that requires urgency, or is it one that cannot be solved simply by rushing? Who (or what) would benefit from the rapid introduction of stablecoins? We examined the practical benefits for each stakeholder.

Clear Benefits for Issuers in a New Market... Uncertainty Remains for Korea's Growth Engine

From the industry's perspective, the clear winner is the stablecoin issuer. By investing the fiat currency received in exchange for issued stablecoins into interest-bearing assets such as government bonds, issuers can generate seigniorage (interest income). This is a much easier way to earn profits compared to manufacturing and other industries. Tether, which issues USDT-the world's leading stablecoin by market share-recorded a net profit of approximately $13 billion last year from managing its reserve assets and other sources. Additional profits may follow if the issuer is listed on the stock market.

Industry insiders emphasize that a platform enabling domestic players to demonstrate their innovative capabilities and enhance competitiveness in this new financial market must be established as soon as possible. With global players already advancing in the United States and elsewhere, Korean firms also need opportunities for free competition within a legal framework.

What practical benefits can the government expect if it quickly and relatively freely establishes this new market? Could this lead to the birth and growth of global innovative companies in Korea, thereby creating a virtuous cycle as a new economic growth engine for the country? Experts' opinions are largely divided into two camps. One camp argues that, although the outcome is still unknown, a platform should be prepared in anticipation of future possibilities. Some suggest that regulatory sandboxes should be used to test new ideas in practice.

The other camp is skeptical about how much global usability a won-based stablecoin can achieve, given that dollar-based stablecoins like Circle and Tether currently control about 90% of the market and dominate the ecosystem. They argue that a strategic approach is needed rather than a race against time, and that risk management should be addressed alongside strategy development.

Consumers Exposed to Coin Run Risks... Divergent Views on Adequate Safeguards

From the consumer perspective, the main advantages are 'fast remittance' and 'low fees.' Because stablecoins bypass traditional financial institutions, remittances and payments can be made more quickly and at relatively lower costs. This benefits not only individuals but also multinational corporations by reducing expenses. In the early stages, won-based stablecoins are expected to be used primarily for virtual asset trading. In this context, they can also improve convenience for participating in the virtual asset market and expand investment opportunities.

However, consumers are critically exposed to the risk of a 'coin run' (a large-scale demand for coin redemption). Stablecoin issuers do not simply hold the fiat currency received from selling coins; instead, they invest it. Current discussions suggest that these reserve assets will be allowed to be invested in relatively stable government bonds. However, if the price of these bonds falls or the issuer defaults, consumers may not be able to redeem their stablecoins for cash. In Korea, where the market infrastructure for short-term bond issuance and trading is underdeveloped, supply-demand imbalances are a persistent issue. There may be a shortage of government bonds to purchase, and especially if market trust collapses and a large-scale redemption occurs, it is unclear whether there will be enough liquidity to absorb all the bonds that need to be sold. In such cases, other investors may also be affected by volatility, potentially triggering a liquidity crisis. Discussions on improving the system for issuing short-term government bonds to support the issuance of won-based stablecoins have only just begun.

Both advocates for rapid introduction and those urging caution agree that clear requirements for issuer entry, reserve assets, and soundness standards are essential. However, there are differing views on what these standards should be. Cautious proponents argue that not only should more than 100% of reserve assets be deposited, but also that clear safeguards-such as a capital base sufficient to mitigate coin run risks-must be established. Some suggest that, to build trust and prevent a coin run from escalating into a market-wide liquidity crisis due to declining reserve asset values or inability to liquidate assets in a timely manner, stablecoin issuers should have capital equivalent to that required of internet-only banks (25 billion won). For reference, commercial banks are required to have 100 billion won in capital. However, current stablecoin bills set the maximum capital requirement for issuers at 5 billion won.

Both Sides Cite 'Monetary Sovereignty'... But What Is the Reality?

Both advocates for rapid introduction and those urging caution cite 'securing monetary sovereignty' as a key rationale. Proponents of swift introduction argue that expanding the use of won-based stablecoins can partially curb the spread of dollar-based stablecoins. They contend that increasing the use of the won in the digital finance industry is essential to protect monetary sovereignty.

However, some argue that, given the widespread use of dollar-based stablecoins, the purpose and scope of a won-based stablecoin remain unclear. The extent to which it will be used in actual commerce is uncertain. For example, the often-cited K-content merchandise market is limited in scale. Even for attracting investment or facilitating payments within the global virtual asset ecosystem, there is little incentive for participants to choose a won-based coin over a dollar-based one. Cautious proponents believe that, in a market dominated by dollar-based stablecoins, a won-based coin will primarily serve as a medium of exchange.

They argue that, to protect monetary sovereignty, it is more important to establish regulations on the currently unregulated use of dollar-based stablecoins than to introduce a won-based stablecoin. Although the immediate risk of dollarization-where the domestic won market is overtaken by the dollar-is low, dollar-based stablecoins are currently used extensively in a legal gray area, often evading regulatory oversight. Therefore, there is an urgent need to establish an institutional framework to control and manage their domestic circulation.

The introduction of a won-based stablecoin primarily for exchange purposes could, in fact, accelerate the activation of the dollar-based stablecoin market. This was the context behind Bank of Korea Governor Rhee Changyong's warning at the European Central Bank (ECB) Sintra Forum in early July, when he stated, "The existence of a won-based coin could make it easier to switch to a dollar-based coin, ultimately increasing the use of dollar-based coins."

Can We Handle the Weakening of Foreign Exchange Regulations and the Erosion of the Separation of Banking and Commerce?

It is also necessary to address issues that could disrupt Korea's unique institutional order. The most notable risks are increased exchange rate volatility and the expansion of capital flows that are difficult to monitor, which could heighten foreign exchange-related risks. If the won is converted into a dollar-based stablecoin within Korea and used for overseas investments, funds can flow abroad without passing through banks or other traditional financial institutions. In this case, the transaction would not be subject to the Foreign Exchange Transactions Act, making it vulnerable to tax evasion and money laundering. While blockchain technology allows for the tracking of transactions between wallets,it is virtually impossible to monitor the actual parties involved in transactions that pass through overseas distributors and other intermediaries. Suspicious transactions would have to be traced after the fact, and it is easy to create new wallets based on pseudonymity.

There must also be prior consideration of situations where large corporations use their affiliates to effectively bypass the principle of separation between banking and commerce by using their own stablecoins. In Korea, non-bank companies are not permitted to operate 'narrow banking' businesses (banks that only provide payment services without lending functions).