[Bitcoin Now] "Introduction of Korean Won Stablecoin? A Shortcut to Undermining Foreign Exchange Regulations"

"Korean Won Stablecoin Could Open Channel for Capital Outflows through Direct Swaps with Dollar-Denominated Virtual Assets"
"Trust in Currency Is Essential... Project Han-Gang Seen as Promising for Fiscal Support Distribution"
"Institutional CBDC Of

"As for whether the rapid introduction of a Korean won stablecoin is necessary, I would answer by saying that the status of the US dollar is a matter separate from technology."

Hyun Song Shin, Economic Adviser and Head of Monetary and Economic Department at the Bank for International Settlements (BIS). Photo by Hyunmin Kim (Asia Economy DB)

On August 21, Hyun Song Shin, Economic Adviser and Head of the Monetary and Economic Department at the Bank for International Settlements (BIS), made this statement while speaking with reporters after completing a session on the latest trends in Central Bank Digital Currency (CBDC) at the "2025 World Economists Conference," which entered its fourth day.

"Korean won stablecoin, direct swap with US dollar-denominated virtual assets... Could open a channel for capital outflows"

During the session, Shin pointed out that "even if a domestic currency (Korean won) stablecoin is introduced, demand for US dollar stablecoins will persist," emphasizing that "it should be developed gradually." He explained that the demand for US dollar stablecoins stems from the dominant role of the US dollar in the global economy and its network effects, making it difficult for a Korean won stablecoin to replace the role of the US dollar stablecoin, even if introduced technologically. He warned, "A Korean won stablecoin could, in fact, open a channel for capital outflows by enabling direct swaps with US dollar-denominated virtual assets via blockchain, effectively undermining existing foreign exchange regulations."

Shin stressed the need for tailored regulations that fit the characteristics of blockchain. Cross-border transactions using stablecoins are estimated at a minimum of $1.6 trillion annually and are rapidly increasing. He noted, "Criminal activities using stablecoins surpassed those using Bitcoin in 2022 and now account for about 63% of all crimes involving virtual assets," expressing concern that "in countries with high currency volatility and vulnerability to capital outflows, stablecoins are being used as a means of capital flight." Previously, Shin had proposed a "legitimate use scoring system for virtual assets" based on tracking the transaction history of wallets that stablecoins have passed through. Shin stated, "While it is impossible to control the blockchain itself, the scoring system is meaningful in that it can control the off-ramps connecting to the banking system," adding, "It also creates a duty of care regarding illegal transactions between users, which is a strength that can be utilized as part of customized regulation."

"Trust in currency is key... Project Hangang is promising for distributing fiscal support"

He pointed out that stablecoins violate the principle of the monetary system, which is to support economic activity based on a shared social perception of the single value of money. To maintain financial system stability and build a reliable payment infrastructure, tokenized central bank and commercial bank money platforms are promising alternatives, citing examples such as the Bank of Korea's "Project Hangang" and BIS's "Project Agora."

Shin explained, "Because final settlement between financial institutions is made through reserve deposits at the central bank, the principle of unquestioned value of currency holds regardless of whether one uses cash, makes a transfer at a bank counter, or pays via a smartphone application." In contrast, he noted that "stablecoins cannot guarantee singularity and always carry the tag of an 'exchange rate.'" He emphasized, "The monetary and financial system must be based on the pursuit of public interest beyond private gain," highlighting the essential role of central banks, governments, and public institutions.

He particularly emphasized that Project Hangang is promising for distributing fiscal support. Since it can be programmed, it is easier to manage than distributing cash. In this context, Yoon Sungkwan, Director of the Digital Currency Department at the Bank of Korea, who attended the session with Shin, highlighted that institutional CBDC can speed up transactions and reduce costs, while also fostering innovation in new areas such as social welfare payments and AI-based economies. Custom voucher systems for social subsidies can restrict spending to specific items. Utilizing the CBDC platform also enables more transparent management of government finances. He pointed out that it is especially advantageous for tracking the flow of public funds, preventing subsidy abuse, and reducing waste and fraud through automated management functions.

(From the second left) Yoon Sungkwan, Director of the Digital Currency Department at the Bank of Korea, Shin Hyunsong, Economic Advisor and Head of the Monetary and Economic Department at the Bank for International Settlements (BIS), and others are giving a presentation on the latest trends in Central Bank Digital Currency (CBDC) at the "2025 World Economists Conference" held at COEX, Gangnam-gu, Seoul on the 21st. Photo by Kim Yuri

Institutional CBDC... Stronger privacy than public blockchains

Meanwhile, Shin emphasized that Project Hangang, which utilizes institutional CBDC, actually has a privacy advantage over public blockchains. He said, "On a public blockchain, if the veil of anonymity is lifted, transaction details are completely exposed. Contrary to common belief, public blockchains are vulnerable to privacy breaches." He added, "Project Hangang uses institutional CBDC, so it operates just like the existing system-the central bank cannot see individual transactions and only conducts final settlement with reserve funds. This gives it a privacy advantage over public blockchains."

Regarding Bank of Korea Governor Lee Changyong's comment that it would be preferable to introduce a Korean won stablecoin first through banks and then gradually expand if necessary, Shin explained, "That is because banks are the most thorough in risk management." He stated that, from the perspective of monitoring and blocking illegal transactions, it is advantageous for financial institutions with strict risk management to adopt it first. Shin said, "Banks are well-versed in account management, identity verification, and blocking illegal transactions," adding, "If the legitimate use scoring system for virtual assets I previously proposed is to be implemented, it is most promising for banks to do so."