40% of Economists Say "Korean Won Stablecoin Legislation Should Wait Until Anti-Money Laundering and International Cooperation Are Secured"

Only 2.9% Support Rapid Legislation and Early Institutionalization
37.1% Cite "Enhancing Financial Innovation and Efficiency"...
28.6% Say "Low Necessity for Introduction"

Economists have expressed a cautious stance regarding the timing of introducing a Korean won stablecoin. While there are high expectations for financial innovation, there are calls for a phased legislative approach that aligns with the strengthening of international cooperation frameworks, in light of potential side effects such as coin runs (large-scale coin withdrawals) and money laundering.

According to the survey "Economic Discussion - Institutionalization of Korean Won Stablecoin" released by the Korean Economic Association on November 12, 40% of participating economists responded that "legislation should be carried out in stages, timed with the further solidification of anti-money laundering (AML) and international cooperation systems," regarding the appropriate timing for legalizing the Korean won stablecoin. Meanwhile, 34.3% believed that "legislation should take place within about one to two years, after thoroughly examining the impact on the macroeconomy and financial markets." Another 22.9% supported "testing through a regulatory sandbox first, then legislating if further discussion is needed." Only 2.9% of economists thought that "legislative discussions should proceed rapidly as they are now to institutionalize it as soon as possible."

Kim Jeongsik, professor at Yonsei University's Department of Economics, stated, "Since it involves private issuance of currency, it is desirable to legislate gradually after observing the legislative processes in countries with international currencies." Yoon Youngjin, professor at Hanyang University's Department of Economics and Finance, also commented, "While the inevitability of technology adoption is acknowledged, a thorough review of the potential impact and risks on the financial intermediation system and foreign exchange market must come first." He further emphasized, "In particular, step-by-step preparations for the internationalization of the Korean won should precede."

Regarding the biggest side effects and potential risks of the spread of the Korean won stablecoin, 35.6% cited "the risk of depegging and coin runs." This was followed by "concerns over weakened control of monetary policy and monetary sovereignty" (22.2%) and "the potential misuse of illegal funds such as money laundering" (17.8%). "Macroeconomic stability risks such as overseas capital outflows" and "hindrance to tax transparency and proper tax base reporting" each received 8.9% of the votes. Professor Kim Jeongsik noted, "Dollar stablecoins operate on an anonymous or pseudonymous basis, and if the Korean won stablecoin is also operated anonymously or pseudonymously, illegal capital outflows may increase." He added, "Anonymous systems make both ex-ante and ex-post regulation difficult, while pseudonymous systems allow for ex-post regulation but make preemptive regulation of capital outflows challenging."

On the other hand, the most anticipated positive effect of introducing the Korean won stablecoin was "innovation in payment systems and cost reduction," cited by 59%. This was followed by "promotion of financial innovation such as fintech and DeFi" (28.1%). "Revitalization of digital content and platform industries" and "pioneering new investment markets through the tokenization of real-world assets such as real estate" each received 6.3%. Notably, no economist supported "internationalization of the Korean won and advancement as an Asian financial hub" as the most significant positive effect.

When asked about the appropriate scope of eligible issuers of the Korean won stablecoin, 58.1% chose "banks and certain non-bank financial institutions that meet requirements." Another 35.5% responded that "issuance should be limited to banks." Only 6.5% of economists thought that prior restrictions on issuers were unnecessary and should be left to market autonomy.

As for the most important driving force behind the introduction of the Korean won stablecoin, 37.1% cited "enhancing financial innovation and efficiency." In contrast, 28.6% responded skeptically, stating that "the necessity for introduction is low." Choi Dongbeom, professor at Seoul National University's Department of Business Administration, pointed out, "At this point, the main driving force is the pursuit of profit by certain groups. If the blockchain ecosystem materializes, it could be meaningful in terms of innovation and efficiency, but if introduced inappropriately, the costs may outweigh the benefits."

Regarding the area expected to be most impacted by the introduction of the Korean won stablecoin, 35.3% predicted "the digital asset industry, including tokenized securities." Meanwhile, 26.5% of economists believed that "its use would be limited due to competition from existing infrastructure and dollar stablecoins."

Meanwhile, 31 out of 92 panel members of the Economic Discussion participated in this survey.