The head of South Korea’s central bank has reportedly said he is not against the country issuing a won-based stablecoin, but is still concerned about managing the foreign exchange of the token.
Reuters reported on Wednesday that Bank of Korea Governor Rhee Chang-yong said at a press conference that “issuing won-based stablecoin could make it easier to exchange them with dollar stablecoin rather than working to reduce use of dollar stablecoin.”
That in turn could increase demand for dollar stablecoin and make it difficult for us to manage forex,” he added.
Rhee’s comment comes as South Korea’s newly elected president, Lee Jae-myung, is moving ahead with crypto regulation as promised during his campaign and as the country’s forex reserve is dwindling.
At the end of December, the Bank of Korea had forex reserves worth $415.6 billion, which dropped to $404.6 billion at the end of May, a decrease of $11 billion in six months, according to data from the Bank of Korea.
Friendly regulatory environment
On June 10, President Lee’s ruling Democratic Party put forward the Digital Asset Basic Act, which would allow companies with a minimum equity capital of $368,000 to issue stablecoins.
The companies would need to keep sufficient reserves to ensure refunds, and they will need approval from the country’s financial regulator, the Financial Services Commission.
The FSC is probing local South Korean exchanges over the transaction fees they charge, which is also part of Lee’s promise to lower the transaction costs to encourage young traders.
Non-US dollar-backed stablecoin
US dollar-backed tokens dominate the stablecoin space, with the largest being Tether (USDT) with a market capitalization of $156 billion, followed by Circle’s USDC (USDC) with a market capitalization of $61 billion, according to DefiLlama.
However, Circle’s euro-pegged stablecoin, EURC, is gaining traction as its market capitalization has shot up to $203 million, an increase of 156% from the start of the year.
Circle’s stock saw big gains on Wednesday after US lawmakers signalled that they would approve the stablecoin-regulation GENIUS Act in the House.
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