"Financial institutions must overhaul internal control frameworks to adopt digital assets such as stablecoins"

As the institutionalization of digital assets such as stablecoins (digital assets whose value is pegged to fiat currency) accelerates, discussions in the financial sector are also gaining momentum on expanding digital-asset-related services. However, a proposal has been raised that improvements are needed—such as reorganizing internal control systems—in order to offer such services.

On the 8th, Professor Hyun-jong Na of Hanyang University said at the "Korean Securities Association Joint Symposium" held at NH Finance Tower in Yeouido, Seoul, that "digital assets have characteristics entirely different from traditional assets that the financial sector has dealt with," adding that "there are limits to relying on the accounting methods and risk management frameworks used for conventional financial assets when providing digital-asset-related services."

Professor Na cited three categories of risk that may arise as the financial sector adopts digital assets: ▲accounting risk, ▲regulatory risk, and ▲market risk.

First, on the accounting front, he explained that economic control over digital assets could become an issue. He said, "In the United States, accounting standards related to digital-asset custody have been eased, and accounting treatment is varying depending on key management methods and control structures," adding that "Korea’s financial sector likewise needs to establish clear accounting standards on the premise that financial institutions outside of exchanges will provide digital-asset services."

As a regulatory risk, he pointed to anti-money laundering and countering the financing of terrorism (AML/CFT) issues. Professor Na emphasized that "without parallel technical controls that can trace and analyze on-chain fund flows, it is difficult to manage regulatory risk."

Regarding market risk, he mentioned the possibility of a stablecoin losing its peg—so-called "depegging." He said, "Trust is structurally central to stablecoins, and their value can swing sharply based solely on uncertainty over reserves or market rumors," adding that "for financial institutions to provide related services, they need systems that can continuously demonstrate reserve management and transparency."

To that end, he stressed that changes to financial institutions’ internal control frameworks are most needed. He said, "With digital assets, financial and accounting controls are also difficult to function unless technical controls come first," adding that "based on an institution’s internal accountability map, the roles and responsibilities of key executives—including the chief executive officer (CEO), chief information security officer (CISO), and chief financial officer (CFO)—must be clearly defined to cover the digital-asset domain as well."

He continued, "Private key management, on-chain transaction monitoring, and reserve verification are not tasks for a specific department or individual, but governance tasks across the entire organization," adding that "rather than responding alone, financial institutions must work with technology companies, accounting firms, and others to build an internal control framework that integrates technology, accounting, and risk management in order to operate digital-asset services in a stable manner."