The Bank of Korea (BOK) has issued a stark warning about the risks posed by won-denominated stablecoins, stating they could undermine the country's foreign exchange management and capital flow controls. The central bank's caution is contributing to a legislative deadlock that has delayed South Korea's comprehensive crypto regulatory framework, including plans for spot crypto ETFs and corporate digital asset trading.
At the Asian Financial Forum in Hong Kong, BOK Governor Lee Chang-yong explicitly outlined the central bank's concerns. He stated that won-based stablecoins would likely be used primarily for cross-border transfers rather than domestic payments. This creates a significant vulnerability, as it could offer new channels for moving funds outside traditional oversight mechanisms, especially during periods of market stress. Governor Lee warned that pairing won-pegged tokens with US dollar stablecoins could create routes that bypass existing capital flow safeguards, potentially weakening the country's ability to stabilize its currency.
The central bank's position has intensified an already fractured political debate in Seoul. The long-awaited Digital Asset Basic Act, intended to define the country's next phase of crypto regulation, has been postponed due to fundamental disagreements over stablecoin issuance. The Bank of Korea favors a narrow, bank-led model for issuance, arguing that commercial banks are easier to supervise and present less systemic risk. In contrast, industry groups are advocating for a broader framework that would allow non-bank financial firms to issue stablecoins under a licensing and supervision regime.
Attempts to find a compromise, such as proposals for bank-anchored consortium models, have so far failed to gain traction in the National Assembly. This legislative gridlock now has ripple effects beyond stablecoins. Broader initiatives tied to South Korea's crypto roadmap, including discussions around allowing publicly listed companies to trade digital assets and the introduction of spot crypto ETFs, have also been pushed back.
The timing of the central bank's warning is critical, as it comes amid pressure on the Korean won. Concerns over potential large-scale dollar outflows due to trade tensions have made policymakers particularly wary of approving financial instruments that could accelerate capital flight during volatility. The message from monetary authorities is clear: while innovation will be considered, it must not come at the expense of control over the national currency and financial stability.
