Bank of Korea Governor Lee Chang-yong threw cold water on plans for Korean won-denominated stablecoins this week, saying they could make it harder for authorities to manage capital flows and adding another grey area to Seoul’s already messy crypto regulatory debate.
Speaking at the Asian Financial Forum in Hong Kong, Lee said officials are looking at a new registration system that would let domestic institutions issue virtual assets. But he made clear that stablecoins are still a problem because of their potential impact on foreign exchange stability.
Lee’s main concern is that won-pegged stablecoins would mostly get used for cross-border transactions and could be combined with US dollar stablecoins to sidestep capital controls when markets get volatile.
His remarks may add fuel to the ongoing debate in Seoul, where lawmakers are trying to move forward with the Digital Asset Basic Act, which is supposed to be the second phase of the country’s virtual asset rules.
Your completely free resource hub designed to boost your knowledge of cryptocurrencies
Who Gets to Issue Stablecoins?
As per media reports, the bill’s submission to the National Assembly has been pushed back, as there is an argument about who should issue won-pegged stablecoins. There are also disagreements over ownership limits for exchanges and who should regulate this.
The central bank wants stablecoin issuance kept mainly with banks to limit systemic risks and foreign exchange problems. The industry wants the door opened wider so non-bank entities can get on it, as long as they are supervised.
Financial regulators have apparently tried floating a compromise where banks would lead groups of issuers, but those talks have not made headway. The stalemate is holding up other things too, including letting publicly traded companies deal in crypto and bringing spot crypto ETFs to South Korea.
Bad Timing With the Won Under Pressure
back,Lee’s warnings land at a moment that is not very favourable for South Korea’s currency. As per media reports, officials are preparing for possible heavy dollar outflows as trade tensions with the US heat up and the won keeps weakening.
The combination of a weakening currency and several regulatory problems shows just how difficult it is for the South Korean government to nurture digital asset growth while keeping a hold on cross-border money flows.
