Where can 'Imperfect Money', Stablecoins, Be Used? [Bae, Kim & Lee's Future Finance]

BIS, Markets, and Government: Conflicting Calculations and the Solution?

"Coordination Between Public and Private Perspectives is Needed"

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What is the 'BIS Report'?... Fintech Companies in Turmoil

Recently, expectations about the issuance of KRW stablecoins led to a sharp rise in the share prices of some fintech companies, followed by a sudden drop after the Bank for International Settlements (BIS) released its annual economic report warning of the risks of stablecoins. Curious about the details, I looked up and read the BIS report.

In its report, the BIS points out that △ stablecoins are incomplete compared to the traditional two-tier monetary system in terms of integrity, singleness, and resilience required for money, △ stablecoins show remarkable growth not only by providing high accessibility to foreign exchange, especially the US dollar, and enabling lower costs and faster settlements for cross-border transactions, but also by facilitating privacy protection through pseudonymity, and △ due to various concerns and vulnerabilities, their role in the future monetary system will remain supplementary; instead, the BIS suggests the introduction of a 'unified ledger.'

In short, the BIS advocates implementing a future monetary system based on a central bank unified ledger consisting of central bank digital currencies (CBDC) and bank deposit tokens by tokenizing the current two-tier monetary structure rather than relying on stablecoins.

Focus on Market Participants' 'New Game Plans'

Immediately after the aforementioned report, there was news that the Bank of Korea's phase two test of central bank digital currencies (CBDC) was temporarily halted. Questions arose among commercial banks about what functions CBDC and deposit tokens could serve, as stablecoin legalization is underway. Despite the logical conclusions of the BIS report, the market still seems to believe in the potential and innovation of stablecoins and is seeking new opportunities.

In such cases, who typically emerges as the winner? Considering that matching regulation levels across multiple jurisdictions is impossible and that digital asset markets freely cross borders, the winner is inevitably the side that acknowledges market demand (the desires of market participants) and actively brings those demands within the sphere of regulation.

To understand why stablecoins are drawing attention, we must examine practical use cases of existing stablecoins. In Korea, there is a trend of registering stablecoin trademarks before establishing proper business models or partnerships, but to actually launch a business, diverse market participants—including banks, securities companies, card companies, fintech firms, and virtual asset operators—must first identify the business model that best leverages their strengths.

Next, the crucial step is seeking optimal business partners to realize such ventures, a process that will involve in-depth information exchanges, behind-the-scenes negotiations, and difficult strategic decisions.

Overseas Precedents Should Be Referenced

As discussions about stablecoins begin in Korea, it is necessary to look at leading overseas cases of legalization and business application to determine the optimal role for each market participant.

Let's briefly review some examples. For banks, a prominent case is JPMorgan's JPM Coin, introduced in 2020. Corporate clients open blockchain deposit accounts (BDA) with JPMorgan and link their systems via API, enabling automated JPM Coin transfers (e.g., auto transfer upon surplus funds), which has improved operational efficiency and finances. If Korean banks were to issue consortium-based KRW stablecoins, their large domestic customer base could allow them to better optimize offerings for local clients, and providing corporate services using programmable payments via smart contracts could become a viable business model.

For securities firms, Dubai serves as an example, where Ripple's RLUSD, issued for institutional settlements, is set to be used in the Dubai Land Department’s real estate blockchain transaction project. Here, real estate payments are made with RLUSD, and property ownership is transferred as NFTs. With similar blockchain trading infrastructure planned domestically, securities firms could have a strong position handling stablecoins as intermediaries for tokenized asset transactions such as STOs and RWAs.

In the case of fintech companies, various examples like StraitsX’s XSGD payment services in Singapore show that settlement for e-commerce platforms and foreign currency remittances through overseas partners can be carried out relatively freely. Particularly for fintech firms with wide distribution networks, stablecoin issuance and circulation are expected to become a core role moving forward.

Other notable cases include partnership between Chainlink and Mastercard, which enables card-based digital asset purchases without a separate wallet app for credit card companies, and the joint issuance and post-acquisition distribution of USDC by Circle and Coinbase at virtual asset exchanges. Additionally, ideas to generate demand for KRW stablecoins beyond mere issuance include integrating stablecoin apps into Samsung Electronics' default smartphone apps, using them for international payments by manufacturers such as Electronic Electronics for Asia-based subcontractors, and commercializing them for foreign tourists like the AE Coin in the UAE as a transport card substitute—all of which warrant consideration.

"Discovering New Markets Through Public-Private Collaboration"

In summary, stablecoins have various use cases in payments, remittances, and foreign exchange transactions, as well as decentralized finance (DeFi). However, the question of who will use domestically issued stablecoins and for what purposes remains an open issue to be explored and designed.

As the BIS's annual economic report notes, the current strong demand for stablecoins signals "societal aspirations for the benefits promised by new technology," and emphasizes that achieving such change responsibly requires bold experimentation and significant cooperation between the public and private sectors. Not only for the coming regulatory provisions, but also for the expansion of use cases and demand, further experimentation and private sector collaboration are encouraged.

Kim Hyo-bong, Attorney at Bae, Kim & Lee LLC I

After working at the Financial Supervisory Service (FSS) for over 10 years, he has established expertise in regulation and market practices in digital finance and virtual assets. After completing the 41st Judicial Research and Training Institute program, he led improvements in funds and trusts systems, private equity dispute mediation, and digital finance matters at the FSS. Since 2022, he has been focusing on establishing virtual asset user protection laws and subordinate rules, as well as supporting self-regulation for exchange listings of virtual assets. He graduated from Yonsei University Law School, completed an LL.M. at Columbia Law School in the US, and earned a Professional M.B.A. from Sungkyunkwan University Graduate School of Business, attaining comprehensive and balanced understanding of both domestic and international law, as well as corporate management and financial market practices. Since joining Bae, Kim & Lee in 2024, he has been providing legal advice on various digital finance matters, including virtual assets and STOs.

Bae, Kim & Lee's Future Finance Strategy Center (headed by Han Jun-sung), established in May 2024, has assembled top-tier experts in the fields of finance and IT—including virtual assets, electronic finance, regulatory response, and information security—to accelerate digital innovation within the financial sector and advance financial technology.