The Bank of Korea (BOK)’s initiative to assign banks the responsibility for introducing stablecoins lacks a solid rationale, according to Dr. Sangmin Seo, the chair of the Kaia DLT Foundation.
In a report published on Monday, the BOK emphasized that banks are already regulated stringently, which should reduce risks linked to the launch of stablecoins in the region.
Nevertheless, the BOK proposes establishing a policy consultative group composed of currency, foreign exchange, and financial authorities to determine issuer qualifications, issuance volumes, and other critical factors.
Seo remarked to Cointelegraph that while the apex bank’s concerns about stablecoin risks are rational, the argument that banks should spearhead their introduction “lacks a logical foundation.”
A More Transparent Future: Seo
Seo suggested that a preferable course of action would involve formulating explicit regulations for stablecoin issuers, which would reduce monetary risks while enabling innovation. He indicated this would permit both banking and non-banking entities that satisfy specific standards to “vie with one another and exhibit their capabilities.”
Dr. Sangmin Seo
Dr. Sangmin Seo (pictured) believes that clarifying rules for stablecoin issuers in South Korea is preferable to entrusting their rollout to banks. Source: YouTube
“It would be even more valuable if the Bank of Korea could provide guidelines on how these risks can be mitigated and what qualifications are required for an issuer to be regarded as trustworthy.”
In June, BOK deputy governor Ryoo Sangdai proposed that local banks should primarily issue stablecoins in South Korea to provide a safety network, gradually diversifying to other sectors.
Stablecoin Yield Ban on the Horizon
The BOK is also advocating for a ban on interest payments on stablecoins, claiming that such features could pose competition to bank deposits and disrupt the sector. Instead, they have proposed the commercialization of deposit tokens, which are digital representations of deposits in a financial institution.
Seo stated that a total prohibition on stablecoin yields would constitute an extreme measure that could stunt adoption.
“While I concur that stablecoins themselves should not offer any yield-bearing characteristics, it would be overly stringent to prevent generating supplementary yield through stablecoins,” he asserted.
South Korea’s Stablecoin Market Heating Up
At least eight prominent South Korean banks have outlined plans in June to introduce a stablecoin linked to the South Korean won, with launches planned for late 2025 and early 2026.
Meanwhile, Naver Financial, the financial technology branch of the South Korean conglomerate Naver, is reportedly moving forward with intentions to acquire Dunamu, operator of the country’s largest cryptocurrency exchange, Upbit, and plans to initiate a won-backed stablecoin project upon completion of this acquisition.
The cryptocurrency landscape in South Korea is benefitting from a more favorable climate following the election of President Lee Jae-myung in June, who has been advocating for multiple crypto-related laws, including a bill to legalize stablecoins.
