The Bank of Korea stablecoin policy is under fire from financial experts. Dr. Sangmin Seo, chair of the Kaia DLT Foundation, has voiced strong concerns about the plan. He says allowing banks to lead the rollout of won-backed stablecoins lacks clear logic. The controversy has triggered a broader debate about balancing financial security and innovation in South Korea’s digital economy.
Bank of Korea Stablecoin Policy Faces Criticism
The Bank of Korea stablecoin policy, released Monday, suggests that banks should issue won-denominated stablecoins. The central bank argues that banks already meet strict capital, foreign exchange, and Anti-Money Laundering (AML) rules. These, it says, would help reduce risk in digital asset markets. The policy also proposes a new body made up of currency and financial regulators to decide who can issue stablecoins and how much can be circulated.
Dr. Seo stated that the Bank of Korea stablecoin policy limits competition and innovation by excluding non-bank issuers. He believes fair rules for all institutions would be a better solution.
Regulation Versus Innovation
Dr. Seo supports strong regulation but says the Bank of Korea stablecoin policy goes too far. He believes it focuses on control instead of fostering innovation. The central bank, he argues, should offer clear, balanced guidelines that promote trust through transparency and compliance.
The Bank of Korea stablecoin policy should include fintech firms and other qualified issuers. Allowing both banks and non-banking entities to participate, he explains, would drive competition and strengthen the nation’s blockchain ecosystem.
A Conservative Approach
Bank of Korea Deputy Governor Ryoo Sang-dai defends the current plan. He stated that the Bank of Korea stablecoin policy puts banks at the center of issuance to ensure safety before opening the door to other sectors.
The policy also calls for banning interest on stablecoins, arguing that such returns could compete with bank deposits and destabilize the financial system. Instead, the central bank is pushing the use of “deposit tokens,” digital representations of traditional bank deposits.
Yield Ban Raises Concerns
Dr. Seo believes banning yield on stablecoins would hurt adoption. While he agrees that stablecoins should not offer direct returns, he says stopping users from earning yield through DeFi platforms is excessive. This move, he warns, could make stablecoins less useful. Critics highlighted the Bank of Korea stablecoin policy risks protecting banks at the cost of innovation.
Private Sector Pushes Ahead
Private institutions are pressing ahead, despite regulatory caution. Eight of South Korea’s biggest banks plan to roll out won-backed stablecoins from 2025-2026.
Meanwhile, Naver Financial, the fintech arm of Naver, is gearing up to acquire Upbit’s operator Dunamu. After the acquisition, it intends to launch its own stablecoin that is backed by the Korean won.
Those moves suggest that private companies still have confidence in stablecoins, even as the Bank of Korea’s stablecoin policy is under debate.
Changing Political and Market Landscape
South Korea’s crypto industry continues to open up with President Lee Jae-myung in power. His government backs legislation to legalize stablecoins and encourage blockchain innovation.
Analysts stated that the Bank of Korea stablecoin policy will play a key role in shaping the future of South Korea’s digital finance. Success will depend on how well regulators balance stability and innovation.
Conclusion
The Bank of Korea has issued a stablecoin statement that’s somewhat crucial. Supporters consider it protection for economic “stability,” while critics say it could become a moat to deter innovators. This notion is increasingly reflected in statements like those of Dr. Sangmin Seo, which call for a more balanced approach between control and creativity.
Appendix: Glossary of Key Terms
- Bank of Korea Stablecoin Policy – A regulatory proposal assigning commercial banks the role of issuing won-backed stablecoins under strict oversight.
- Stablecoin – A digital currency pegged to a stable asset, such as a fiat currency, to reduce price volatility.
- Won-Backed Stablecoin – A type of stablecoin tied to the South Korean won, designed to maintain a fixed value equal to the national currency.
- Deposit Token – A digital representation of bank deposits that can be used for blockchain-based transactions under regulated systems.
- Anti-Money Laundering (AML) – Financial safeguards and legal requirements aimed at preventing illegal transactions and fund concealment.
- Decentralized Finance (DeFi) – A blockchain-based system that allows users to access financial services without intermediaries like banks.
Frequently Asked Questions Bank of Korea stablecoin policy
1. What is the Bank of Korea stablecoin policy?
It is a proposal allowing banks to issue won-backed stablecoins under strict regulation to maintain financial safety.
2. What about stablecoin yield?
The policy bans interest-bearing features to avoid competition with traditional bank deposits.
3. Which institutions are launching stablecoins?
Eight South Korean banks and Naver Financial have announced plans under the Bank of Korea stablecoin policy framework.
4. What could the long-term impact be?
Analysts believe the Bank of Korea stablecoin policy could shape South Korea’s innovation pace in the global crypto industry.