South Korea's Stablecoin Conundrum: Balancing Innovation with Economic Stability

In Seoul, the governor of South Korea's central bank voiced concerns over issuing won-denominated stablecoins, citing challenges in managing capital flows. Governor Rhee Chang-yong noted that easier exchange of won-based stablecoins for dollar stablecoins could heighten demand for the latter, complicating foreign exchange management.

Stablecoins, typically pegged 1:1 to the U.S. dollar, are gaining popularity among crypto traders and companies alike. However, global regulators remain skeptical, viewing cryptocurrencies as speculative and competition for national currencies.

The comments by Governor Rhee come as President Lee Jae Myung aims to fulfill his election promise of enabling companies to issue won-based stablecoins. The Democratic Party's recent proposal of the Digital Asset Basic Act seeks to establish the necessary regulatory framework. The appointment of Kim Yong-beom, a former crypto firm chief, as chief policy officer, adds to speculation around the government's intentions toward stablecoin issuance.

(With inputs from agencies.)