South Korean fintech firm Kakao Pay experienced a sharp 17% decline in its stock price following a trading suspension by the Korea Exchange due to concerns over stablecoin exposure linked to its affiliates, including KakaoBank. This suspension marks the second such halt within a week amid growing regulatory skepticism in South Korea about the risks posed by won-pegged stablecoins.
Prior to the drop, Kakao Pay shares had surged dramatically, tripling in value as investors speculated on South Korea's evolving digital asset regulations and the potential launch of local won-pegged stablecoins. Kakao Pay had also filed multiple trademark applications related to digital currency services, fueling market excitement about its future in the stablecoin space.
However, regulatory authorities, including the Bank of Korea governor Lee Chang-yong, have expressed caution over stablecoins, warning that domestic stablecoins could increase demand for dollar-denominated alternatives and complicate foreign exchange management. Globally, regulators remain uncertain about stablecoins' ability to replace traditional money, underscoring challenges in creating sustainable oversight frameworks.
This correction in Kakao Pay's stock highlights the tension between enthusiastic market speculation and mounting regulatory scrutiny in the rapidly changing digital asset environment. Similar fintech companies involved in won-pegged stablecoin projects, such as KakaoBank, have also faced volatile price swings correlated to regulatory developments.