DSRV "Claims that KRW stablecoin price instability are completely untrue"

DSRV, a domestic validator company, directly rebutted the Capital Market Research Institute's claim that KRW stablecoins (virtual assets pegged to fiat currency) are structurally unstable, calling it "a misreading of historical cases and overseas regulation."

On the 29th, DSRV co-CEO Seo Byung-yun posted on LinkedIn that the Capital Market Research Institute's recently released report titled 'Stablecoin Price Stability' "places 17th-century goldsmiths and regulated stablecoins on the same plane and overly simplifies the intent of foreign legislation," he said. Specifically, Seo strongly rebutted the report, saying it "leads to the conclusion that stablecoins are risky based on historical failures of private money," and that "modern stablecoins are designed based on regulated financial standards such as reserve assets exceeding 100%, segregated custody, licensing and supervision, anti-money laundering (AML)/know-your-customer (KYC)."

He also criticized the part that cited the USDC depegging as evidence of stablecoin risk itself. Seo said, "The 2023 USDC price fluctuation was caused by Silicon Valley Bank (SVB)'s failure in interest rate risk management and supervisory lapses, an incident in which regulated bank risk was transmitted to a stablecoin," and "interpreting this as a structural vulnerability of stablecoins reverses cause and effect."

Seo also explained that the report's point that "in extreme crises, government bond values can fall and depegging risk increases" is inappropriate. He rebutted, "It is unfair to single out a specific asset class as risky on the assumption of a collapse of the financial system that shakes government bonds, bank deposits, and money market funds (MMFs)," adding, "At that level of crisis, the NQA (No Questions-Asked Principle) for bank deposits would also be hard to maintain."

He criticized the part that limited reserve asset regulation to "short-term government bonds." He said, "Overseas regulations such as MiCA require reserve assets to be broadly composed of bank deposits, high-quality liquid assets (HQLA), etc.," and "Korea has a sufficient pool of safe assets comparable to government bonds, such as Monetary Stabilization Bonds and policy financial institution bonds." He added that the conclusion that "Korea's lack of short-term government bonds makes it difficult to maintain stablecoin stability" "stems from a misunderstanding of the concept of HQLA."

Regarding the proposal to limit the number of issuers, Seo said, "If the number of issuers is artificially reduced, a few firms could become 'too big to fail,' increasing the burden on public safety nets," and emphasized, "Combining on-chain verification technologies such as Proof of Reserves (PoR) allows effective supervision even if the number of issuers is large."

Finally, Seo concluded, "To strengthen discussions on stablecoin risks, it is necessary to accurately understand foreign regulations, reserve asset composition, and supervisory technologies," and warned, "Incorrect premises and narrowed interpretations can distort policy direction."