South Korea’s push for a won-based stablecoin accelerates under President Lee Jae-myung, sparking optimism among fintech firms and concern from central bankers over financial stability and monetary control.
Stablecoins are rapidly emerging as a central topic in South Korea’s financial landscape, as commercial banks, fintech companies, and lawmakers rally around the idea of a cryptocurrency pegged to the Korean won.
A stablecoin is a form of digital asset typically tethered to the value of a fiat currency or commodity, such as the US dollar or gold. These tokens are designed to maintain a stable value, unlike highly volatile cryptocurrencies like Bitcoin.
Under President Lee Jae-myung’s administration, the drive to establish a Korean won-backed stablecoin market has gained significant traction. The government’s effort to integrate digital assets within the traditional financial system is spurring policy development and regulatory momentum.
Yet, the proposal is not without controversy. The Bank of Korea (BOK) and other financial institutions have expressed concerns, warning that a stablecoin tied to the won may disrupt monetary sovereignty and pose a threat to economic stability.
The president’s initiative is partially fueled by worries over increasing demand for dollar-based stablecoins, such as Tether and Circle. When Korean investors purchase these tokens, they effectively contribute to the dollar’s dominance in the global digital economy, potentially undermining the won.
Recent data from the BOK highlights this trend. The trading volume of dollar-pegged stablecoins on Korea’s major exchanges — Upbit, Bithumb, Korbit, Coinone, and Gopax — soared to 56.95 trillion won ($41.6 billion) in the first quarter of 2025, a sharp rise from 17.06 trillion won in the third quarter of 2024.
Adding momentum to the movement is the appointment of Kim Yongbeom as President Lee’s chief economic adviser. Kim, formerly the first vice finance minister and head of the crypto think tank Hashed Open Research, has previously stated, “A regulated Korean won-backed stablecoin could be controlled more precisely than fiat currency.”
In line with these developments, Democratic Party lawmaker Min Byoungdug introduced the Digital Asset Framework Act. The proposed legislation would allow corporations, including non-bank entities with at least 500 million won ($360,000) in capital, to issue won-pegged stablecoins.
Fintech companies are responding swiftly. Shares of Kakao Pay, the financial arm of tech conglomerate Kakao, nearly doubled within a week, as speculation mounted over its potential role in this emerging market. Local banks are also mobilizing, forming task forces and pursuing technology partnerships.
“Stablecoins are not yet profitable for banks. But if the won-based stablecoin is realized, banks would, of course, want to play a pivotal role,” said an official from a major commercial lender.
If structured like their U.S. counterparts, won-backed stablecoins would be supported by low-risk, short-term Korean financial instruments such as government bonds or money market funds.
Despite the enthusiasm, the BOK remains cautious. Governor Rhee Chang-yong warned in May that “allowing a non-banking institution to freely issue won-based stablecoins could seriously weaken the effects of monetary policy.”
A senior BOK official added, “The issuance of stablecoins could increase the money supply and potentially affect the status of the won. It is necessary to approach the matter with caution.”
Concerns also persist about capital flight and regulatory circumvention. Analysts note that won-backed tokens could be converted into dollar-backed stablecoins and moved offshore, bypassing conventional oversight mechanisms for cross-border transactions.
While similar issues exist with Bitcoin, tighter local regulations like the “travel rule” — requiring identity verification for international transfers over 1 million won — have helped mitigate risks.
The future of Korea’s won-backed stablecoin now hinges on navigating the tightrope between innovation and financial security — a balancing act with deep implications for the nation’s economic sovereignty.
