"Implementation in the Second Half of Next Year? Won-Based Stablecoins Must Balance Speed and Safety"[2025 National Audit]

Korean Won Ranks 12th in Foreign Exchange Market with 1.8% Share
"Won-Based Stablecoins Expected in Second Half of Next Year... Both Direction and Speed Are Essential"

There have been calls for the "rapid institutionalization focused on risk management" to secure global competitiveness for won-based stablecoins.

As of last month, the global stablecoin market was valued at approximately $309.7 billion, with dollar-based stablecoins accounting for more than 80% of the market. In South Korea, the stablecoin market saw transaction volumes reach about 57 trillion won in the first quarter of this year. Multiple related bills have been proposed, and discussions on institutionalization are underway.

According to audit materials submitted by the Bank of Korea to Democratic Party lawmaker Yoo Dongsoo, a member of the National Assembly’s Political Affairs Committee, as of April, the US dollar accounted for 89.2% of transactions in the global foreign exchange market, ranking first, while the Korean won ranked 12th with a 1.8% share. Assemblyman Yoo pointed out that since won-based stablecoins are still only at the discussion stage for institutionalization, there are concerns that the won’s position in the global stablecoin competition could weaken if this continues.

However, if the risks associated with stablecoins are not sufficiently reviewed during the institutionalization process, these risk factors could materialize. Stablecoins present various risks, including a decrease in seigniorage, reduced effectiveness of monetary policy, undermined trust in payment and settlement systems, threats to financial stability, and the potential for being exploited as a means to evade foreign exchange regulations or for illegal transactions.

If stablecoin issuers fail to properly manage their reserve assets or if IT risks occur, systemic issues could lead to a "coin run" (large-scale coin withdrawals), which may shock short-term funding markets such as government bonds. Conversely, if a bank run or similar event causes problems with reserve assets deposited as bank deposits by issuers, the shock could spread to the virtual asset market.

Stablecoins could also be misused as a means to circumvent capital and foreign exchange regulations by bypassing reporting procedures required under the Foreign Exchange Transactions Act. According to data submitted by the Korea Customs Service to Assemblyman Yoo’s office, about 77% of foreign exchange crimes investigated by the Korea Customs Service over the past five years were related to virtual assets.

Assemblyman Yoo emphasized, "Legal and institutional safeguards to manage the risks arising from the introduction of won-based stablecoins must be sufficiently reflected in the Financial Services Commission’s second-phase digital asset legislation. In particular, since self-owned capital is a device that guarantees the credibility of stablecoin issuers and can reinforce liquidity in times of crisis, it is necessary to consider the formation of consortia and appropriate capital requirements as key elements in the institutional design process."

He added, "Won-based stablecoins are likely to be implemented in the second half of next year. In the global environment led by dollar stablecoins, we must approach this strategically, ensuring that both 'direction' and 'speed' are not neglected, so that won-based stablecoins can secure at least the same level of influence as their current share in the foreign exchange market."