Bank of Korea: "Stablecoins could negatively impact monetary policy and financial stability"

The Bank of Korea has stated that if stablecoins (virtual assets linked to the value of legal tender) were to replace legal currency, it could negatively affect the central bank's policy execution in areas such as monetary policy, financial stability, and payment systems, thus necessitating a separate regulatory framework.

In the '2024 Payment and Settlement Report' released on the 21st, the Bank of Korea noted that the Virtual Asset User Protection Act was enacted and implemented in July last year, and in November of the same year, the Virtual Asset Committee was launched to discuss expanding corporate market participation and establishing a regulatory framework for stablecoins.

Specifically, the Bank of Korea sees the need for regulation as stablecoins, which are actively being discussed recently, inherently possess payment instrument characteristics unlike general virtual assets (cryptocurrencies).

Lee Byung-mok, Director General of the Bank of Korea's Financial Settlement Bureau, pointed out, "Currently, stablecoins based on the US dollar are typically linked one-to-one with the value of legal tender, but if unexpected shocks occur and the value becomes unstable, redemption demands will follow."

He added, "To respond to this, issuing institutions may have no choice but to resort to large-scale deposit withdrawals or selling government bonds."

He further stated, "In the case of the United States, while stablecoins have provided a demand base for the government bond market, there are concerns that events could cause turmoil," adding, "The Bank of Korea holds a similar view."