Controversy Over 'Issuance of Won-Pegged Coins'..."Non-bank Driven Innovation" vs "Undermining Monetary Policy"

The Onslaught of Stablecoins

(11) Won-Pegged Coin on the National Agenda

Lee's Presidential Campaign Pledge, Ruling Party Accelerates Efforts

"Need to Build a Barrier to Block Dollar Coins

Creating New Demand by Combining With K-Content"

Bank of Korea: "Limited Permission Only for Banks"

"Limited Use Cases for Non-Reserve Currency Coins

Concern Over Market Shock in the Event of a Coin Run"

The won stablecoin emerged as a 'hot potato' around the recent presidential election. Some have voiced skepticism toward the won stablecoin, questioning how much demand there will be for a stablecoin backed by the won, a non-reserve currency. Concerns are also raised that, should a large-scale withdrawal event (coin run) occur, the stablecoin issuer might dump government bonds and amplify market disruptions.

On the other hand, the National Planning Committee and the ruling party deem the introduction of a won stablecoin inevitable for the sake of monetary sovereignty. There are worries that the domestic market could be taken over as the dollar stablecoin expands under the full support of the United States government. In fact, it is becoming a reality for foreign workers residing in Korea to receive their wages in dollar stablecoins, or for companies to settle trade payments in dollar stablecoins. An official from the National Planning Committee stated, "Considering the relationship with the U.S. government, it is difficult to completely block dollar stablecoins," and added, "At present, growing a won stablecoin better than the dollar stablecoin is the only viable alternative."

There are also expectations that combining the won stablecoin with K-content could create new demand overseas. For example, fans on K-pop platforms such as Weverse and Bubble could use won stablecoins to purchase tickets and merchandise. In this way, the won stablecoin could serve as a tool to reinforce 'won hegemony' beyond acting as a dollar coin barrier.

◇ Sharp Divide Over 'Allowing Non-banks'

Recently, the debate has shifted to the 'issuer of coins.' The key issue is whether to restrict the issuance of won stablecoins to the banking sector or allow non-banks as well. The Bank of Korea opposes non-bank issuance of stablecoins, arguing that indiscriminate issuance of won stablecoins could increase market liquidity and weaken its monetary policy. Chang Yong Rhee, Governor of the Bank of Korea, pointed out, "Allowing non-banks to issue stablecoins would create a multitude of private currencies," adding, "This could replicate the chaos of the 19th century, where private banks freely issued currency."

On the contrary, there are also arguments against limiting issuance to banks, citing that it would significantly reduce the competitiveness of won stablecoins. Hyung Koo Kang, a professor at Hanyang University’s Department of Finance & Management, commented, "To make the won stablecoin a success, it should be developed as an export item, not just a domestic product. If we only take a cautious, bank-centered approach, we cannot win in the global platform competition," adding, "It would be desirable for fintech companies, cryptocurrency exchanges, and overseas partners—along with banks—to form a consortium and enter the issuance business together."

There are also analyses that the Bank of Korea's concerns may be excessive. A financial industry official said, "Stablecoins are essentially similar to prepaid electronic payment instruments such as Naver Pay Money," adding, "The negative impact on monetary policy is overstated for stablecoins alone." In the United States, Europe, and Hong Kong, stablecoins issued by non-banks are allowed either entirely or under certain conditions.

Seo Hyunggyo, Nam Jungmin, Bae Sungsoo, Reporters seogyo@hankyung.com