[Hankyung Essay] Finance Meets Stablecoins

Hee-soo Jeong, Head of the Hana Institute of Finance

Finance Meets Stablecoins

We first encountered the virtual asset called Bitcoin in 2008, through the paper by Satoshi Nakamoto (Bitcoin: A Peer to peer Electronic Cash System). The concept of blockchain was also first used then. These terms have now become quite familiar to us.

Even if we do not fully understand how blockchain works technically, by investing in virtual assets we experienced the inefficiencies of traditional stock trading. Younger generations who experienced virtual assets—tradable 24 hours a day and withdrawable instantly—before stocks make one wonder what they think of the existing methods of stock trading. Stablecoins are being used not only for cross-border remittances and payment settlements but also for everyday purchases. There are frequent reports that foreign workers residing in the country request wages in stablecoins, and that foreign merchants at Namdaemun Market pay with stablecoins and even exchange them via ATMs.

Just 7~8 years ago, virtual assets were shunned not only by regulated financial companies but also by supervisory authorities. Many countries perceived them as a challenge to the traditional financial system and were preoccupied with maintaining the existing methods, but the situation has now changed.

In the United States, stablecoins came to the forefront during a second Trump administration. They are being used as a means to maintain a new form of dollar hegemony. In the U.S., virtual assets are being rapidly incorporated into the regulated system, such as by introducing spot Bitcoin exchange-traded funds (ETFs) and passing the "Genius Act" to regulate the issuance and supervision of stablecoins. Major countries such as Europe and Japan are also strongly moving to incorporate stablecoins into the regulated system.

South Korea is no exception. Virtual asset trading began before regulations were considered, and as users increased, the country implemented the Virtual Asset User Protection Act last year to protect them. With growing interest in stablecoins, the government is pushing a second-stage legislative effort to enact a Basic Act on Virtual Assets.

Unlike other virtual assets, stablecoins are closer to digital currency and directly affect the financial system. This is because virtual asset platforms also offer DeFi (Defi) services similar to traditional banking, such as deposits and loans. The monetary system built over centuries faces a situation where it could change, but that does not mean stablecoins can be a complete substitute. We need to find ways to secure financial stability while leveraging the strengths of blockchain technology—convenience, speed, and security. In particular, anti-money laundering (AML) and know-your-customer (KYC) measures are essential conditions for inclusion in the regulated system, so thorough measures must be prepared.

If past financial innovations were changes within the existing system, future financial innovation is likely to be a change that alters the existing framework. Korea may be somewhat behind other countries, but as it prepares a new regulatory framework it should focus on designing it carefully rather than rushing.