South Korea’s Central Bank Backs Gradual Stablecoin Launch

South Korea’s central bank, the Bank of Korea (BOK), has called for a cautious and phased introduction of stablecoins in the country’s financial system.

Overview

According to Yonhap News, BOK deputy governor Ryoo Sangdai stated that a won-backed stablecoin should be launched through regulated commercial banks to provide a secure foundation. Sangdai said, “It would be desirable to initially allow stablecoin issuance primarily through banks, which are subject to higher levels of financial regulation, and gradually expand it to the non-banking sector.” He added, “The aim is to establish a safety net, considering the potential for market disruption or consumer harm.” 

The proposal comes amid growing interest in blockchain-based digital finance and the global rise of central bank digital currencies (CBDCs). According to a recent policy statement and interviews with senior officials, the BOK emphasised that stablecoins—cryptocurrencies pegged to fiat currencies like the Korean won or US dollar—could offer benefits such as faster payments and broader financial inclusion. However, they also present significant regulatory and monetary policy challenges. 

The bank stated that introducing stablecoins should be approached carefully, considering potential risks, including financial instability, privacy concerns, and undermining sovereign currency control. A senior BOK official noted that while innovation in financial technology is welcome, it must not come at the expense of regulatory clarity and consumer protection. The BOK is already running pilot programs for a CBDC, which could complement or compete with privately issued stablecoins. The central bank’s current stance aims to allow time for regulatory frameworks, technological infrastructure, and consumer readiness to catch up with the pace of innovation.

Regulatory Alignment and Global Cooperation Seen as Key

A significant concern for the BOK is ensuring that any stablecoin framework aligns with South Korea’s existing financial regulations and international standards. The central bank emphasised collaborating with global institutions such as the International Monetary Fund (IMF), the Financial Stability Board (FSB), and other central banks to create interoperable and secure digital currency ecosystems. This approach mirrors actions taken by other jurisdictions, such as Japan, the European Union, and the United States, all in various stablecoin and CBDC development stages. 

South Korea’s strategy suggests that stablecoins could complement CBDCs, provided safeguards are in place to prevent misuse in illicit finance or disruptions to traditional banking systems. The BOK also expressed concern about tech companies or non-bank entities issuing stablecoins without appropriate oversight. The central bank warned that allowing such initiatives without stringent compliance checks could erode trust in the broader financial system and increase systemic risks.

Balancing Innovation with Monetary Stability

While acknowledging the efficiency gains that could be achieved through stablecoins, the BOK highlighted the delicate balance between fostering innovation and maintaining monetary stability. One of the central concerns is the potential for stablecoins to divert deposits away from commercial banks, which could reduce the effectiveness of traditional monetary policy tools.

The BOK’s research indicates that widespread adoption of stablecoins, especially those issued by foreign entities or linked to non-Korean currencies, could diminish the effectiveness of the won as a unit of account and medium of exchange. To address this, the bank is considering stablecoins that are strictly backed 1:1 by the Korean won and issued under the supervision of licensed financial institutions.

Consumer education, transparent reserve mechanisms, and real-time audibility were essential for any future stablecoin framework. As part of its broader digital currency initiative, the BOK will continue to test various technological solutions and gather public input through 2025. South Korea’s central bank is not rejecting stablecoins but seeking a pragmatic path that aligns with national interests. Its preference for a gradual, well-regulated rollout reflects a growing global consensus: digital currencies have potential but must be introduced responsibly.