"Stablecoins Require Preparedness for Reserve Assets and Cross-Border Transaction Regulations"

Seminar "The Present and Future of Digital Currency" Hosted by the Korea Institute of Finance
Calls for Proper Legal Design from the Outset
Stablecoin Ecosystem Should Be Designed with a Global Focus

Amid ongoing difficulties in legislating stablecoins, some have argued that discussions on related regulations should take precedence.

Kim Jaejin, Executive Vice Chairman of the Digital Asset Exchange Alliance (DAXA), stated at the seminar "The Present and Future of Digital Currency" hosted by the Korea Institute of Finance on the 28th, "To prevent stablecoins from being traded over-the-counter or in the shadows, incentives are needed to bring these transactions onto exchanges." Stablecoins are virtual assets that seek to maintain price stability by being pegged 1:1 to specific assets such as the US dollar.

Kim introduced the current legislative status regarding stablecoins and explained two main issues. The first is the reserve assets required to maintain the value of stablecoins, and the second is how to prevent their use in illegal transactions. He noted that highly liquid cash, deposits, and short-term government bonds are often used as reserve assets. In particular, he pointed out that, due to the characteristics of Korea's National Fiscal Act, the issuance of short-term government bonds is inherently limited. He explained, "If long-term government bonds are used as reserve assets, the 1:1 peg between physical currency and assets can easily break. Therefore, short-term government bonds are necessary, but in Korea, they are extremely scarce."

He also suggested that even if stablecoins are legalized, measures must be considered to prevent over-the-counter and illegal transactions. Kim said, "Even if the roles of operators are defined and reporting obligations are imposed for cross-border transfers, there is still a lack of means to control unlicensed fundraising and over-the-counter transactions using stablecoins," adding, "Incentives are needed to bring these transactions onto exchanges."

Kim Dongseop, Head of the Digital Currency Planning Team at the Bank of Korea, is giving a lecture at the seminar "The Present and Future of Digital Currency" hosted by the Korea Institute of Finance on the 28th. Photo by Oh Gyumin

There was also an opinion that the stablecoin ecosystem should not be designed solely around the domestic market. Ryu Changbo, Head of the Blockchain Team at NongHyup Bank, said, "Although the commercialization of stablecoins is still in its early stages, cases like JPMorgan show that they are evolving from simple virtual asset trading tools to payment and settlement instruments. Designing the ecosystem around the domestic market is risky, and since stablecoins could serve as a point of contact in international finance, cross-border interoperability must be considered."

Takezawa Yusuke, Chief Strategy Officer (CSO) of Progmat, suggested that the direction should be clearly set from the legal design stage to build a proper ecosystem. He said, "Sustainable growth cannot be achieved without the right foundation." He added that even if private companies make significant investments, if regulatory policies are not aligned with long-term scalability, business development will not create real value. He emphasized, "The legal design stage determines the future direction more than anything else."

The Bank of Korea shared its future direction for building digital currency infrastructure. Kim Dongseop, Head of the Digital Currency Planning Team at the Bank of Korea, announced that the second phase of live transactions for "Project Han River," an institutional digital currency pilot, will be conducted next year. He added that this will be carried out alongside a pilot project for treasury fund management, with plans to improve user convenience and expand use cases. He also stated that the Bank will continue discussions on linking stablecoins, including real-time disclosure of reserve assets and the redemption of won-based stablecoins through the digital currency system.