South Korea’s central bank, the Bank of Korea (BOK), has intensified its call for a cautious approach to stablecoin regulation, emphasizing that commercial banks should lead the issuance of Korean won-pegged stablecoins. In a report submitted to the National Assembly Strategy and Finance Committee, the BOK warned that privately issued digital tokens could undermine monetary policy and pose significant financial stability risks.
Concerns Over Financial Stability and Regulatory Compliance
The BOK described stablecoins as ‘currency-like substitutes’ and stressed that their introduction must consider not only industrial benefits but also the broader implications for monetary policy, foreign exchange stability, and financial risks. The central bank is particularly concerned that stablecoins could be used to circumvent foreign exchange regulations, including prior reporting requirements, and that allowing non-bank entities to issue them could conflict with Korea’s separation of banking and commerce principles.
Proposed Safeguards and Regulatory Models
To mitigate these risks, the BOK proposed several safeguards, including a bank-centered consortium model and the establishment of a statutory interagency policy body to coordinate approvals and supervision across regulators. The central bank cited the United States’ GENIUS Act framework as an example of effective cross-agency supervision, involving the Treasury Department, Federal Reserve, and the Federal Deposit Insurance Corporation.
Industry Pushback and Legislative Delays
The BOK’s stance has faced pushback from industry participants and some lawmakers. Sangmin Seo, the chair of the Kaia DLT Foundation, argued that the argument for banks leading the stablecoin rollout lacks a ‘logical foundation.’ Seo emphasized that clearer rules for issuers can minimize risks and foster innovation. Despite these differing views, the debate has led to delays in the legislative process, with a resolution expected in January 2026.
Forward-Looking Insights
The ongoing debate highlights the complex interplay between technological innovation and regulatory oversight. As stablecoins continue to gain traction globally, the BOK’s cautious approach underscores the need for a balanced regulatory framework that supports innovation while safeguarding the financial system. The coming months will be crucial in determining how South Korea navigates this evolving landscape and positions itself as a leader in digital finance.
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