BOK: “Stablecoin proliferation is creating gaps in FX regulation…legal revisions are essential”

The Bank of Korea proposed overhauling the foreign-exchange (FX) regulatory framework as a measure to strengthen anti-money laundering (AML) safeguards amid the expansion of stablecoins—digital assets pegged to fiat currencies.

Kim Shin-young, head of the FX Operations Division at the Bank of Korea’s International Department, made the remarks at the ‘Forum on Trends and Review of AML Systems in Response to the Proliferation of Stablecoins,’ held on Jan. 28 at the National Assembly Members’ Office Building in Yeouido, Seoul. “AML and FX regulation are closely linked. As the digital financial environment changes, FX regulation also needs to evolve,” Kim said.

Kim explained that regulatory arbitrage using dollar-denominated stablecoins is already under way. “At the acquisition stage, channels such as undocumented overseas remittances or transfers disguised as current-account transactions are being used,” he said, adding that stablecoins are then “misused through over-the-counter (P2P) trading for domestic and overseas spending, illicit gifting, overseas flight capital, or as a means of illegal remittance.” He warned that “if won-denominated stablecoins spread into everyday transactions, regulatory avoidance could become even more frequent.”

To mitigate these issues, the central bank argues that the legal nature of stablecoins and the scope of cross-border transactions must be clearly defined. “The same regulation should apply to the same economic activity,” Kim said, stressing that “all cross-border transactions using stablecoins—whether dollar- or won-based—should be included within the scope of FX regulation.” He added that for this, the National Assembly must pass the proposed amendment to the Foreign Exchange Transactions Act, titled ‘Partial Amendment to the Foreign Exchange Transactions Act for Virtual-Asset Monitoring,’ introduced by Rep. Choi Eun-seok of the People Power Party.

Financial regulators also underscored the need to refine the AML framework for stablecoins.

Park Joo-young, director at the Korea Financial Intelligence Unit (FIU), said during the discussion, “Because stablecoins have monetary characteristics, trust is key—and the foundation of that trust is AML.”

Park outlined key tasks for a stablecoin AML framework, including: ▲imposing AML obligations across ecosystem participants ▲supplementary risk-mitigation measures for areas outside regulatory coverage ▲developing AML approaches tailored to blockchain characteristics.

He further warned that “if there are areas not subject to AML regulation—such as personal wallets or decentralized finance (DeFi)—a balloon effect could occur, with money-laundering transactions concentrating in those areas,” emphasizing that “complementary tools such as tighter travel rule enforcement and on-chain monitoring should be used in parallel to minimize unregulated areas.”